If the real exchange rate is greater than 1, then the A)nominal exchange rate x U.S. price foreign price. The dollars required to purchase a good in the U.S. would buy more then enough foreign currency to buy the same good overseas. B)nominal exchange rate x U.S. price foreign price. The dollars required to purchase a good in the U.S. would not buy enough foreign currency to buy the same good overseas. C)nominal exchange rate x U.S. price

Question

If the real exchange rate is greater than 1, then the A)nominal exchange rate x U.S. price > foreign price. The dollars required to purchase a good in the U.S. would buy more then enough foreign currency to buy the same good overseas. B)nominal exchange rate x U.S. price > foreign price. The dollars required to purchase a good in the U.S. would not buy enough foreign currency to buy the same good overseas. C)nominal exchange rate x U.S. price < foreign price. The dollars required to purchase a good in the U.S. would buy more then enough foreign currency to buy the same good overseas. D)nominal exchange rate x U.S. price < foreign price. The dollars required to purchase a good in the U.S. would not buy enough foreign currency to buy the same good overseas.

Quizplus · Accepted Answer

If the real exchange rate is greater than 1, it means that the nominal exchange rate multiplied by the U.S. price is greater than the foreign price, indicating that the dollars required to purchase a good in the U.S. would buy more than enough foreign currency to buy the same good overseas.

If the Real Exchange Rate Is Greater Than 1, Then