Other things the same,the real exchange rate between American and Chinese goods would be higher if
A)prices of Chinese goods were higher,or the number of yuan a dollar purchased was higher.
B)prices of Chinese goods were higher,or the number of yuan a dollar purchased was lower.
C)prices of Chinese goods were lower,or the number of yuan a dollar purchased was higher.
D)prices of Chinese goods were lower,or the number of yuan a dollar purchased was lower.

Question

Quizplus · Accepted Answer

A higher real exchange rate means that American goods are relatively cheaper compared to Chinese goods. This can be achieved by either decreasing the price of Chinese goods or increasing the number of yuan a dollar purchases. Therefore, a lower price of Chinese goods (as in option C) or a higher number of yuan a dollar purchases would lead to a higher real exchange rate between American and Chinese goods.

Other Things the Same,the Real Exchange Rate Between American and Chinese