economics hard True/False

The Nominal Effective Exchange Rate (NEER) is a more accurate indicator of a country's international trade competitiveness than the Real Effective Exchange Rate (REER) because it adjusts for domestic inflation differentials.

  1. True
  2. False

Answer: False

The reverse is true. NEER is simply an unadjusted, weighted average of a country's currency relative to a basket of its major trading partners' currencies. REER adjusts the NEER for the inflation differentials between the home country and its trading partners, making REER the true measure of a nation's export competitiveness in global markets.

Topic International Economics - Exchange Rates
Exam Relevance UPSC Prelims, Banking, SSC
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