How nominal exchange rate is different from real exchange rate?
Answer»
Nominal Exchange Rate
Real 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.