Assuming no change in the nominal exchange rate,how will a decrease in the price level in the United States relative to France affect the real exchange rate between the two countries? (Assume the United States is the "domestic" country.)
A)The real exchange rate will rise.
B)The real exchange rate will fall.
C)The real exchange rate will be unaffected.
D)The impact on the real exchange rate cannot be predicted.

Question

Quizplus · Accepted Answer

A decrease in the U.S. price level relative to France makes U.S. goods cheaper compared to French goods, leading to a decrease in the real exchange rate.

Assuming No Change in the Nominal Exchange Rate,how Will a Decrease