If the price of a good in the U.S. is $10, the exchange rate is 2 units of foreign currency per dollar, and the foreign price of the same good is 30 units of foreign currency, then the real exchange rate is 2/3.

Question

Quizplus · Accepted Answer

The real exchange rate is calculated as (foreign price / domestic price) * nominal exchange rate. Here, it is (30 / 10) * 2 = 6, and the real exchange rate is 2/3 when comparing the cost in foreign currency to the cost in domestic currency.

If the Price of a Good in the U