Other things the same,the real exchange rate between American and British goods would be higher if
A) prices of British goods were higher,or the number of pounds a dollar purchased was higher.
B) prices of British goods were higher,or the number of pounds a dollar purchased was lower.
C) prices of British goods were lower,or the number of pounds a dollar purchased was higher.
D) prices of British goods were lower,or the number of pounds a dollar purchased was lower.

Question

Quizplus · Accepted Answer

A higher real exchange rate means that American goods are relatively cheaper compared to British goods. This can happen if either the prices of British goods are lower or the number of pounds a dollar purchases is higher. Therefore, the correct option is C where the prices of British goods are lower or the number of pounds a dollar purchases is higher.

Other Things the Same,the Real Exchange Rate Between American and British