When a country\'s real exchange rate appreciates: a. Its nominal exchange must h

Question

When a country's real exchange rate appreciates: a. Its nominal exchange must have also appreciated. b. Foreign goods become more expensive in terms of domestic purchasing power. c. It could result if the domestic exchange rate is pegged in terms of the foreign exchange rate and foreign inflation rates are relatively high compared to domestic inflation rates. d. It could result if the domestic exchange rate is pegged in terms of the foreign exchange rate and domestic inflation rates are relatively high compared to foreign inflation rates.

Explanation / Answer

Foreign goods become more expensive in terms of domestic purchasing power.

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