In the open-economy macroeconomic model, the price that balances supply and demand in the market for foreign-currency exchange is the
A)nominal exchange rate.
B)nominal interest rate.
C)real exchange rate.
D)real interest rate.

Question

Quizplus · Accepted Answer

The real exchange rate balances supply and demand in the market for foreign-currency exchange by adjusting for differences in price levels between countries, reflecting the relative value of goods and services.

In the Open-Economy Macroeconomic Model, the Price That Balances Supply