Which of the following best defines the real exchange rate?
A)the price of foreign bonds in terms of domestic bonds
B)the price of foreign currency in terms of domestic currency
C)the price of domestic goods in terms of foreign goods
D)the price of domestic currency in terms of foreign currency
E) none of the above

Question

Quizplus · Accepted Answer

The real exchange rate is defined as the price of domestic goods in terms of foreign goods. This measures how much of goods from one country can be exchanged for goods from another country, taking into account price levels and currency values.

Which of the Following Best Defines the Real Exchange Rate