Which of the following best defines the nominal exchange rate?
A)It is the nominal interest rate in one country divided by the nominal interest rate in the other country.
B)It is the rate at which a person can trade the currency of one country for the currency of another.
C)It is the price of a good in one country divided by the price of the same good in another.
D)It is the number of goods a person can trade for a similar good in another country.

Question

Quizplus · Accepted Answer

The nominal exchange rate is the rate at which a person can trade the currency of one country for the currency of another. It is simply the price of one currency in terms of another. Option A refers to the interest rate parity, while option C refers to the relative prices of goods in different countries and option D refers to the terms of trade.

Which of the Following Best Defines the Nominal Exchange Rate