Which of the following is a feature of the 'Real Exchange Rate'?
A. It is simply the nominal exchange rate
B. It is independent of price levels
C. It is the nominal exchange rate adjusted for relative price levels between countries
D. It is determined only by interest rates
Answer: Option C
Solution (By JKSSB Mock Tests)
The real exchange rate is defined as the nominal exchange rate multiplied by the ratio of foreign to domestic price levels (or the relative price of foreign to domestic goods).
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