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1. Please select each piece of information needed to calculate a real exchange rate.
a. nominal exchange rate
b. foreign price in foreign currency
c. domestic price in foreign currency
d. domestic price in home currency
2. A higher real exchange rate implies that:______
a. domestic goods have become cheaper relative to foreign goods.
b. foreign goods have become more expensive relative to domestic goods.
c. domestic goods have become more expensive relative to foreign goods.
d. the domestic currency is depreciating.

Sagot :

adioabiola

We are required to give the informations needed to calculate a real exchange rate.

1. Informations needed to calculate a real exchange rate are nominal exchange rate, domestic price in home currency, and foreign price in foreign currency.

  • Real exchange rate can be calculated with the formula:

Real exchange rate = (Nominal exchange rate × Domestic price level) ÷ foreign price level

2. A higher real exchange rate implies that the domestic currency is depreciating.

Therefore, real exchange rate depends on nominal exchange rate and price

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