What is the difference between nominal exchange rates and real exchange rates?
What will be an ideal response?
A nominal exchange rate measures the value of one country's currency in terms of another country's currency. A real exchange rate measures the price of domestic goods in terms of foreign goods. Mathematically, the real exchange rate is equal to the nominal exchange rate times the ratio of the domestic price level to the foreign price level.
You might also like to view...
People take fewer trips by airplane when their incomes fall because of a recession. Trips by airplane must be
A) a normal good. B) an inferior good. C) a substitute for other goods. D) a complement to other goods. E) an inelastic good.
The height of the demand curve for a product indicates the
a. minimum price consumers are willing to pay for an additional unit of it. b. minimum quantity consumers are willing to purchase at the current price. c. maximum price consumers are willing to pay for an additional unit of it. d. minimum price required to induce suppliers to produce an additional unit of it.