Which of the following statement correctly defines the term Bilateral Nominal Exchange Rate ........

Economic Affairs Balance of Payments

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Which of the following statement correctly defines the term Bilateral Nominal Exchange Rate?

It is the ratio of foreign to domestic prices, measured in the same currency.

It is the exchange rate of one currency against another in money terms.

It means that goods cost the same in two countries when measured in the same currency.

It is the measure of a country’s international competitiveness.

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Explanation:

Option (b) is correct: Bilateral Nominal Exchange Rate - They are exchange rates for one currency against another and they are nominal because they quote the exchange rate in money terms, i.e. so many rupees per dollar or per pound. Bilateral Exchange Rate involves a currency pair, while an effective exchange rate is a weighted average of a basket of foreign currencies, and it can be viewed as an overall measure of the country’s external competitiveness.