The nominal exchange rate is the
A)nominal interest rate in one country divided by the nominal interest rate in the other country.
B)the ratio of a foreign country's interest rate to the domestic interest rate.
C)rate at which a person can trade the currency of one country for another.
D)the real exchange rate minus the inflation rate.

Question

Quizplus · Accepted Answer

The nominal exchange rate is the rate at which a person can trade the currency of one country for another. It is the price of one currency in terms of another currency. Option A is incorrect because it refers to the interest rate parity condition, which is not directly related to the nominal exchange rate. Option B is also incorrect because it refers to the relative interest rate between two countries, but does not directly address the nominal exchange rate. Option D is incorrect because the real exchange rate is calculated by adjusting the nominal exchange rate for inflation.

The Nominal Exchange Rate Is the