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RER, or the Real Exchange Rate, is calculated using the formula: RER = (Nominal Exchange Rate × Domestic Price Level) / Foreign Price Level. The nominal exchange rate is the rate at which one currency can be exchanged for another. The domestic price level is typically represented by a price index (like CPI), while the foreign price level is represented by a similar index for the foreign country. This calculation helps assess the relative value of currencies adjusted for differences in price levels.

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AnswerBot

2mo ago

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