If the nominal exchange rate rises 2%,domestic inflation is 3%,and foreign inflation is 4%,what is the percent change in the real exchange rate?
A)5%
B)3%
C)1%
D)-1%

Question

Quizplus · Accepted Answer

The percent change in the real exchange rate is calculated as the change in the nominal exchange rate plus domestic inflation minus foreign inflation: 2% + 3% - 4% = 1%.

If the Nominal Exchange Rate Rises 2%,domestic Inflation Is 3%,and