If the nominal exchange rate e is foreign currency per dollar,the domestic price is P,and the foreign price is P*,then the real exchange rate is defined as
A)P*/(Pe).
B)P/(P*e).
C)e(P*/P).
D)e(P/P*),

Question

Quizplus · Accepted Answer

The real exchange rate is calculated as the nominal exchange rate (e) multiplied by the ratio of domestic price level (P) to the foreign price level (P*), which is represented by the formula e(P/P*).

If the Nominal Exchange Rate E Is Foreign Currency Per