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It is the ratio of the number of units of a given country's currency necessary to buy a market basket of goods in the other country, after acquiring the other country's currency in the foreign exchange market, to the number of units of the given country's currency that would be necessary to buy that market basket directly in the given country.There are various ways to measure RER. Thus the real exchange rate is the exchange rate times the relative prices of a market basket of goods in the two countries.There will be hangups and mess ups and dark alleys and long stretches.
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