Question

What is the real exchange rate? What is its relationship to the current account?

Answer 1

Answer) Real Exchange rate (RER) between two currencies is the product of the nominal exchange rate and the ratio of prices between the two countries

A current account is in balance when the country's residents have enough to fund all purchases in the country.The relationship between the Current Account Balance and Exchange Rates. As goods and services flow from one country to another, the exchange rates of those countries' currencies tend to fluctuate to promote balanced trade between the two nations.

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