2 years ago

1. Please select each piece of information needed to calculate a real exchange rate.

1 answer:

Volgvan2 years ago

6 0

We are required to give the informations needed to calculate a real exchange rate.

1. Informations needed to calculate a real exchange rate are nominal exchange rate, domestic price in home currency, and foreign price in foreign currency.

Real exchange rate can be calculated with the formula:

Real exchange rate = (Nominal exchange rate × Domestic price level) ÷ foreign price level

2. A higher real exchange rate implies that the domestic currency is depreciating.

Therefore, real exchange rate depends on nominal exchange rate and price

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Please see attached solution

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