# Real Exchange Rate Calculator

LAST UPDATE: June 20th, 2018

## What is the real exchange rate?

The real exchange rate is an indication of what an equivalent good would cost in your economy.

A regular exchange rate demonstrates how much two currencies can be traded for.

The real exchange rate demonstrates how much an item sold in foreign currency would cost in local currency.

## Formula

$\text{Real Exchange Rate} = \frac{\text{Nominal Exchange Rate} \times \text{Price of the Foreign Basket}}{\text{Price of the Domestic Basket}}$