The domestic currency price of a representative domestic expenditure basket is
A) P, the domestic price level.
B) E, the nominal exchange rate.
C) P times E, the domestic price level times the domestic price level.
D) P , the foreign price level.
E) P times E, the foreign price level times the nominal exchange rate.

Question

The domestic currency price of a representative domestic expenditure basket is
A) P, the domestic price level. 
B) E, the nominal exchange rate. 
C) P times E, the domestic price level times the domestic price level. 
D) P , the foreign price level. 
E) P times E, the foreign price level times the nominal exchange rate.

Quizplus · Accepted Answer

The domestic currency price of a representative domestic expenditure basket is reflected by the domestic price level (P), as it represents the overall cost of goods and services in the domestic economy. The other options involve the foreign price level or the nominal exchange rate, which are not directly related to the domestic expenditure basket.

The Domestic Currency Price of a Representative Domestic Expenditure Basket