If purchasing-power parity holds, then the value of the a. real exchange rate is equal to one. A dollar buys the quantity of foreign currency equal to the U. S. price level divided by the foreign country's price level. b. nominal exchange rate is equal to one. A dollar buys the quantity of foreign currency equal to the U. S. price level divided by the foreign country's price level. c. real exchange rate is equal to one. A dollar buys as many goods in the U. S. as it does overseas. d. nominal exchange rate is equal to one. A dollar buys as many goods in the U. S. as it does overseas.

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Business

Jaylen Hancock

20 February, 10:35

If purchasing-power parity holds, then the value of the a. real exchange rate is equal to one. A dollar buys the quantity of foreign currency equal to the U. S. price level divided by the foreign country's price level. b. nominal exchange rate is equal to one. A dollar buys the quantity of foreign currency equal to the U. S. price level divided by the foreign country's price level. c. real exchange rate is equal to one. A dollar buys as many goods in the U. S. as it does overseas. d. nominal exchange rate is equal to one. A dollar buys as many goods in the U. S. as it does overseas.

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Shaw · Answer 1

Answer: The correct answer is "c. real exchange rate is equal to one. A dollar buys as many goods in the U. S. as it does overseas.".

Explanation: The real exchange rate of one currency with respect to another is the purchasing power of a currency after its conversion.

That is, the real exchange rate is a measure that indicates the purchasing power of one currency against another. Unlike the nominal exchange rate, it takes into account prices in the country to which the currency belongs.