Question

How do supply and demand determine the dollar exchange rate?

		The supply for dollars by importers who sell dollars for the foreign currency interacts with the demand curve for dollars from buyers of exports from the US.
		The supply for dollars by those who are wanting to sell a foreign currency interacts with the demand curve for dollars from buyers who are buying foreign currency.
		The two governments get together and come to a conclusion regarding what rate they will trade their currencies.
		Big businesses determine the exchange rates by telling buyers what they will sell their products for.

What is the distinction between nominal and real exchange rates?

		Nominal rates reflect the current actual cost of one currency for another. Real rates discount the nominal units of currency by any?realized inflation.
		Nominal rates reflect the inflation discounted cost of one currency for another. Real rates reflect the actual units of currency that are traded.
		Nominal rates reflect the rates that are traded in the market place. Real rates reflect the governments required exchange rate.
		Both a and c are correct.

Answer 1

a) "A"

The supply for dollars by importers who sell dollars for the foreign currency interacts with the demand curve for dollars from buyers of exports from the US. The importers demand foreign currency and supply the Dollar to get a foreign currency and the exports demand dollar and supply foreign currency.

b) "A"

Nominal rates reflect the current actual cost of one currency for another. Real rates discount the nominal units of currency by any realized inflation. Nominal rates are not adjusted for the inflation but the real rates are.