- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 7. Capital Flows and the FX Market
- Subject 1. The Foreign Exchange Market
CFA Practice Question
The higher the real exchange rate, the ______ your relative purchasing power.
B. lower
C. They are not related.
A. higher
B. lower
C. They are not related.
Correct Answer: B
The real exchange rate can be considered the real price you face to buy foreign goods and services.
User Contributed Comments 2
| User | Comment |
|---|---|
| vatsal92 | As inflation increases, prices go up...and you end up buying less than before. |
| khalifa92 | either way, as long as XR goes up purchasing power decreases |