Which statement about real exchange rates is not true?
A) Real exchange rate changes are caused by changes in nominal exchange rates.
B) Real exchange rates measure deviations from PPP.
C) Real exchange rates are always unity.
D) Real exchange rates affect the international competitive positions of countries.

Question

Quizplus · Accepted Answer

Real exchange rates are not always unity; they can rise or fall depending on changes in the underlying economic factors such as inflation rates, productivity growth, and changes in terms of trade. Choices A, B, and D are true statements about real exchange rates.

Which Statement About Real Exchange Rates Is Not True