Question

Q. Which of the following statements with respect to the Nominal Effective Exchange Rate is/are correct?

Select the correct code from the options given below:

• A. 1 only
• B. 2 only
• C. Both 1 and 2
• D. None of the above

Answer 1

The correct option is B 2 only

Explanation:

• Statement 1 is incorrect. The nominal effective exchange rate (NEER) is an unadjusted weighted average rate at which one country’s currency exchanges for a basket of multiple foreign currencies.
• Statement 2 is correct. NEER is an indicator of a country’s international competitiveness in terms of the foreign exchange (forex) market. Forex traders sometimes refer to the NEER as the trade-weighted currency index.