For most currencies,the nominal bilateral exchange rate is defined as
A) the amount of domestic currency needed to buy one dollar
B) the amount of domestic currency needed to buy 1 unit of foreign currency
C) the amount of foreign currency for which 1 unit of domestic currency can be sold
D) the domestic currency price of the pound sterling
E) the quantity of gold that can be purchased for one unit of domestic currency

Question

Quizplus · Accepted Answer

The nominal bilateral exchange rate is defined as the amount of domestic currency needed to buy 1 unit of foreign currency. Therefore, choice B is the correct answer. Option A is incorrect because it defines the nominal exchange rate in terms of the US dollar. Option C defines the exchange rate in terms of selling foreign currency for domestic currency. Option D defines the exchange rate in terms of the pound sterling, which is a specific foreign currency, and option E defines the exchange rate in terms of gold, which is not a currency.

For Most Currencies,the Nominal Bilateral Exchange Rate Is Defined as