A country's domestic currency's real exchange rate,q,is defined as
A)E.
B)E times P.
C)E times P .
D)(E times P )/P.
E)P/(E times P ).

Name: A country's domestic currency's real exchange rate,q,is defined as A)E. B)E times P. C)E times P . D)(E times P )/P. E)P/(E times P ).
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Question

A country's domestic currency's real exchange rate,q,is defined as
A)E. 
B)E times P. 
C)E times P . 
D)(E times P )/P. 
E)P/(E times P ).

Quizplus · Accepted Answer

The real exchange rate is the nominal exchange rate (E) multiplied by the domestic price level (P), divided by the foreign price level (P*). Therefore, the correct formula is (E x P)/P*.

A Country's Domestic Currency's Real Exchange Rate,q,is Defined as