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Basic Question 3 of 12
Which one(s) is (are) true?
II. An increase in the real exchange rate implies a reduction in the relative purchasing power of the domestic currency.
I. The real exchange rate can be defined as the nominal exchange rate that takes the inflation differentials among countries into account.
II. An increase in the real exchange rate implies a reduction in the relative purchasing power of the domestic currency.
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I passed! I did not get a chance to tell you before the exam - but your site was excellent. I will definitely take it next year for Level II.
Tamara Schultz
Learning Outcome Statements
describe the foreign exchange market, including its functions and participants, distinguish between nominal and real exchange rates, and calculate and interpret the percentage change in a currency relative to another currency
CFA® 2025 Level I Curriculum, Volume 1, Module 7.