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Question
Q. With reference to the exchange rate, consider the following:
Which of the statements given above is/are correct:
Q. With reference to the exchange rate, consider the following:
Which of the statements given above is/are correct:
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Solution
The correct option is C Both 1 and 2
Explanation:
Statement 1 is correct: Exchange rate is defined as the rate at which units of one currency are exchanged for another currency.
Statement 2 is correct: The real exchange rate refers to the ratio of the foreign price of the currency to the domestic price of the currency. The real exchange rate is often used as a tool to measure the international competitiveness of a country.
Explanation:
Statement 1 is correct: Exchange rate is defined as the rate at which units of one currency are exchanged for another currency.
Statement 2 is correct: The real exchange rate refers to the ratio of the foreign price of the currency to the domestic price of the currency. The real exchange rate is often used as a tool to measure the international competitiveness of a country.
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