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Consider the following statements:
- The Nominal effective exchange rate (NEER) is a multilateral rate representing the basket of foreign currencies, each weighted by its importance to the domestic country in international trade.
- The Real Effective exchange rate (REER) is interpreted as the quantity of domestic goods required to purchase one unit of a given basket of foreign goods.
- The nominal exchange rate is the true measure of a country’s international competitiveness.
Which of the statements given above is/are correct?
- a)1 and 2 only
- b)2 and 3 only
- c)1 only
- d)1, 2 and 3, 5
Correct answer is option 'A'. Can you explain this answer?
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Consider the following statements: The Nominal effective exchange rate...
- Foreign exchange market is the market in which national currencies are traded for one another. The major participants in this market are commercial banks, foreign exchange brokers and other authorised dealers and the monetary authorities. • The price of one currency in terms of the other is known as the exchange rate.
- The nominal exchange rate describes the rate at which an individual can trade the currency of one country for the currency of another country. That means it measures how much of currency B can be bought in exchange for currency A or vice versa
- The real exchange rate describes the rate at which an individual can trade the goods and services of one country for the goods and services of another country. That means it describes how much of a foreign good or service can be exchanged for one unit of a domestic product.
- Real exchange rate = ePf/ P, where P and Pf are the price levels here and abroad, respectively, and e is the rupee price of foreign exchange (the nominal exchange rate).
- If the real exchange rate is equal to one, currencies are at purchasing power parity.
- If the real exchange rises above one, this means that goods abroad have become more expensive than goods at home. The real exchange rate is often taken as a measure of a country’s international competitiveness. Hence statement 3 is not correct.
- Nominal Effective Exchange Rate (NEER) which is a multilateral rate representing the price of a representative basket of foreign currencies, each weighted by its importance to the domestic country in international trade. The average of export and import shares is taken as an indicator of this. Hence statement 1 is correct.
- The Real Effective Exchange Rate (REER) is calculated as the weighted average of the real exchange rates of all its trade partners, the weights being the shares of the respective countries in its foreign trade. It is interpreted as the quantity of domestic goods required to purchase one unit of a given basket of foreign goods. Hence statement 2 is correct.
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Consider the following statements: The Nominal effective exchange rate...
's competitiveness in the global market.
The first two statements are correct, but the third statement is incorrect. The nominal exchange rate is the rate at which one currency can be exchanged for another currency. While it does affect a country's competitiveness in international trade, it is not the true measure of competitiveness as it does not take into account differences in inflation rates between countries. The REER, on the other hand, adjusts for inflation and provides a more accurate measure of a country's competitiveness.
The first two statements are correct, but the third statement is incorrect. The nominal exchange rate is the rate at which one currency can be exchanged for another currency. While it does affect a country's competitiveness in international trade, it is not the true measure of competitiveness as it does not take into account differences in inflation rates between countries. The REER, on the other hand, adjusts for inflation and provides a more accurate measure of a country's competitiveness.
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Consider the following statements: The Nominal effective exchange rate (NEER) is a multilateral rate representing the basket of foreign currencies, each weighted by its importance to the domestic country in international trade. The Real Effective exchange rate (REER) is interpreted as the quantity of domestic goods required to purchase one unit of a given basket of foreign goods. The nominal exchange rate is the true measure of a country’s international competitiveness.Which of the statements given above is/are correct?a)1 and 2 onlyb)2 and 3 onlyc)1 onlyd)1, 2 and 3, 5Correct answer is option 'A'. Can you explain this answer?
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Consider the following statements: The Nominal effective exchange rate (NEER) is a multilateral rate representing the basket of foreign currencies, each weighted by its importance to the domestic country in international trade. The Real Effective exchange rate (REER) is interpreted as the quantity of domestic goods required to purchase one unit of a given basket of foreign goods. The nominal exchange rate is the true measure of a country’s international competitiveness.Which of the statements given above is/are correct?a)1 and 2 onlyb)2 and 3 onlyc)1 onlyd)1, 2 and 3, 5Correct answer is option 'A'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Consider the following statements: The Nominal effective exchange rate (NEER) is a multilateral rate representing the basket of foreign currencies, each weighted by its importance to the domestic country in international trade. The Real Effective exchange rate (REER) is interpreted as the quantity of domestic goods required to purchase one unit of a given basket of foreign goods. The nominal exchange rate is the true measure of a country’s international competitiveness.Which of the statements given above is/are correct?a)1 and 2 onlyb)2 and 3 onlyc)1 onlyd)1, 2 and 3, 5Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Consider the following statements: The Nominal effective exchange rate (NEER) is a multilateral rate representing the basket of foreign currencies, each weighted by its importance to the domestic country in international trade. The Real Effective exchange rate (REER) is interpreted as the quantity of domestic goods required to purchase one unit of a given basket of foreign goods. The nominal exchange rate is the true measure of a country’s international competitiveness.Which of the statements given above is/are correct?a)1 and 2 onlyb)2 and 3 onlyc)1 onlyd)1, 2 and 3, 5Correct answer is option 'A'. Can you explain this answer?.
Consider the following statements: The Nominal effective exchange rate (NEER) is a multilateral rate representing the basket of foreign currencies, each weighted by its importance to the domestic country in international trade. The Real Effective exchange rate (REER) is interpreted as the quantity of domestic goods required to purchase one unit of a given basket of foreign goods. The nominal exchange rate is the true measure of a country’s international competitiveness.Which of the statements given above is/are correct?a)1 and 2 onlyb)2 and 3 onlyc)1 onlyd)1, 2 and 3, 5Correct answer is option 'A'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Consider the following statements: The Nominal effective exchange rate (NEER) is a multilateral rate representing the basket of foreign currencies, each weighted by its importance to the domestic country in international trade. The Real Effective exchange rate (REER) is interpreted as the quantity of domestic goods required to purchase one unit of a given basket of foreign goods. The nominal exchange rate is the true measure of a country’s international competitiveness.Which of the statements given above is/are correct?a)1 and 2 onlyb)2 and 3 onlyc)1 onlyd)1, 2 and 3, 5Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Consider the following statements: The Nominal effective exchange rate (NEER) is a multilateral rate representing the basket of foreign currencies, each weighted by its importance to the domestic country in international trade. The Real Effective exchange rate (REER) is interpreted as the quantity of domestic goods required to purchase one unit of a given basket of foreign goods. The nominal exchange rate is the true measure of a country’s international competitiveness.Which of the statements given above is/are correct?a)1 and 2 onlyb)2 and 3 onlyc)1 onlyd)1, 2 and 3, 5Correct answer is option 'A'. Can you explain this answer?.
Solutions for Consider the following statements: The Nominal effective exchange rate (NEER) is a multilateral rate representing the basket of foreign currencies, each weighted by its importance to the domestic country in international trade. The Real Effective exchange rate (REER) is interpreted as the quantity of domestic goods required to purchase one unit of a given basket of foreign goods. The nominal exchange rate is the true measure of a country’s international competitiveness.Which of the statements given above is/are correct?a)1 and 2 onlyb)2 and 3 onlyc)1 onlyd)1, 2 and 3, 5Correct answer is option 'A'. Can you explain this answer? in English & in Hindi are available as part of our courses for UPSC.
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