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Define Real versus nominal changes in Foreign exchange rates?

  • Define Real versus nominal changes in Foreign exchange rates?
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Answer #1

Real Foreign Exchange rates

It is, how much domestic goods and services are exchanged for the goods and services in foreign country. it is related to the real type of objects, prodects etc

It can be calculated by using the following equation

Real exchange rate = (nominal exchange rate X domestic price) / (foreign price)

Nominal Foreign Exchange rates

It is, how much domestic Currencies are exchanged for the foreign currenceis. it is related to the Cash and other type of financial objects.

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