1.

How nominal exchange rate is different from real exchange rate?

Answer»
Nominal Exchange RateReal Exchange Rate
  • It is expressed in terms of money.
  • It is the ration of foreign prices to domestic prices.
  • It is the amount of domestic currency paid to purchase one unit of foreign currency.
  • It is expressed in terms of purchasing power of both the currencies.
  • The number of units of domestic currency one must given up to get an unit of foreign currency or the price of foreign currency in terms of domestic currency.
  • The relative price of foreign goods in terms of domestic goods.



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