When we look at exchange rates between two countries, what is the relationship between the exchange rate expressed in units of the domestic currency and the exchange rate expressed in units of the foreign currency?
A) They are both equal to one.
B) They cancel each other out.
C) One is always the reciprocal of the other.
D) They can never coexist.

Question

Quizplus · Accepted Answer

The exchange rate expressed in units of the domestic currency is simply the reciprocal of the exchange rate expressed in units of the foreign currency. For example, if the exchange rate between US dollars and Euros is 1.25, then the exchange rate between Euros and US dollars would be 0.8 (1/1.25). Therefore, one is always the reciprocal of the other.

When We Look at Exchange Rates Between Two Countries, What