Which of the following best defines the real exchange rate?

CA Foundation · Business Economics · MTP · September 2025
Which of the following best defines the real exchange rate?
(A) A. The market rate for converting one currency into another
(B) B. The rate at which a country trades goods/service for another
(C) C. Rate fixed by central bank
(D) D. The average of spot and forward rates

Suggested Answer and Working Notes:

Correct Answer: Option (B)

B. The rate at which a country trades goods/service for another

Topics: International Trade

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