A country's real exchange rate:
A) measures how many units of foreign exchange one really gets for one unit of domestic currency.
B) is equal to the nominal exchange rate multiplied by the domestic price level divided by the foreign price level.
C) is equal to the nominal exchange rate multiplied by the foreign price level divided by the domestic price level.
D) the price of a domestic car divided by the price of a foreign car.

Question

Quizplus · Accepted Answer

The real exchange rate is a measure of the purchasing power of one currency relative to another. It is calculated by multiplying the nominal exchange rate by the domestic price level and dividing by the foreign price level.

A Country's Real Exchange Rate