If the Mexican nominal exchange rate does not change,but prices rise faster in Mexico than in all other countries,then the Mexican real exchange rate
A)does not change.
B)rises.
C)declines.
D)There is not enough information to answer the question

Question

Quizplus · Accepted Answer

The real exchange rate is a measure of the relative price of goods and services between two countries. It is calculated by adjusting the nominal exchange rate for inflation. If prices in Mexico are rising faster than in all other countries, this means that Mexican goods and services are becoming relatively more expensive compared to goods and services from other countries. Therefore, the real exchange rate of Mexico should be rising.

If the Mexican Nominal Exchange Rate Does Not Change,but Prices