If the real exchange rate is greater than 1,then the A)nominal exchange rate x price foreign price.The currency required to purchase a good at home would buy more then enough foreign currency to buy the same good overseas. B)nominal exchange rate x price foreign price.The currency required to purchase a good at home would not buy enough foregoing currency to buy the same good overseas. C)nominal exchange rate x price

Question

If the real exchange rate is greater than 1,then the A)nominal exchange rate x price > foreign price.The currency required to purchase a good at home would buy more then enough foreign currency to buy the same good overseas. B)nominal exchange rate x price > foreign price.The currency required to purchase a good at home would not buy enough foregoing currency to buy the same good overseas. C)nominal exchange rate x price < foreign price.The currency required to purchase a good at home would buy more then enough foreign currency to buy the same good overseas. D)nominal exchange rate x price < foreign price.The currency required to purchase a good at home would not buy enough foreign currency to buy the same good overseas.

Quizplus · Accepted Answer

A real exchange rate greater than 1 means that the home currency is stronger than the foreign currency. Therefore, the nominal exchange rate multiplied by the price of a good at home would be greater than the foreign price. This means that the currency required to purchase a good at home would buy more than enough foreign currency to buy the same good overseas, making imports cheaper and exports more expensive.

If the Real Exchange Rate Is Greater Than 1,then the