<p>Presumably one bundle of goods and services which costs about USD 113 in the United States would cost about USD 29 in India</p>

<p>so the bundle which costs about USD 113 in the United States would cost about INR 18546 in India at a market exchange rate of 64:1</p>

<p>suggesting a purchasing power parity of about INR 16.4 : USD 1</p>

<p>The <a href="https://data.oecd.org/conversion/purchasing-power-parities-ppp.htm" rel="nofollow noreferrer">OECD calculations of PPPs</a> suggest about 17:1 recently for India so this is the correct order of magnitude</p>

CC BY-SA 3.0
2018-02-09T09:23:02.220Z
2018-02-09T09:23:02.220Z
Henry
<p>According to <a href="https://data.oecd.org/price/price-level-indices.htm" rel="nofollow noreferrer">OECD</a> the price level of India is 29, and that of united states is 113, and nominal exchange rate is 64-1(INR-$). So what is the real exchange rate? </p>

<ol>
<li>Is it $$RER = NER\times\frac{US_{PriceLevel}}{INR_{PriceLevel}}=273 \\ or \\RER = NER\times\frac{INR_{PriceLevel}}{US_{PriceLevel}}=16$$</li>
</ol>

<p>I believe it should be the second one, because the price level in India is less than that in US so buying power of dollar should be less. Is this reasoning correct?</p>

CC BY-SA 3.0
2018-02-09T07:18:22.377Z
This a trivial question you could easily solve by not omitting the units of measurement.
Giskard
CC BY-SA 3.0
2018-02-09T07:23:41.510Z
That's exactly what I thought. I think price level should have units $(\$)^{-1}$ and $(inr)^-1$ and nominal exchange rate should be $(inr)/\$ $. Are these units correct?
Piyush Divyanakar
CC BY-SA 3.0
2018-02-09T07:42:58.633Z
Why do you think these are correct? Why do you think they are incorrect? The kind of questions you are posting to the site are [not a good match for a Stack Exchange](https://economics.meta.stackexchange.com/questions/1465/economics-se-policy-on-homework-questions). These should be broad questions about concepts and theory, not "I did this, is it ok?"
Giskard
CC BY-SA 3.0
2018-02-09T08:58:05.327Z
I am extremely new to this. I don't have enough understanding of the subject to write questions in a way that is broad and general. I am not really asking this for a homework or an assignment but to improve my understanding. I will ask better questions in the future but I have to get stupid ones out the way first right. PS: Just second week since I started macroeconomics.
Piyush Divyanakar
CC BY-SA 3.0
2018-02-09T09:39:20.490Z
I sympathize but that is not what this SE is for.
Giskard
CC BY-SA 3.0
2018-02-11T08:15:38.830Z
@denesp do you know of a forum where I can get such doubts clarified.
Piyush Divyanakar
CC BY-SA 3.0
2018-02-11T09:26:32.363Z
Sorry, I don't. Talking to classmates is always a good option though!
Giskard
CC BY-SA 3.0
2018-02-12T02:43:42.120Z
I am out of luck there. Out of college and doing this as a self study thing.
Piyush Divyanakar
CC BY-SA 3.0
2018-02-12T07:41:00.493Z
All I can do is reiterate my sympathies.
Giskard
<exchange-rates><price-level>
Real exchange rate of India and United State?
Piyush Divyanakar
# Real exchange rate of India and United State?

(Asked by: username_0 on 2018-02-09)

According to [OECD](https://data.oecd.org/price/price-level-indices.htm) the price level of India is 29, and that of united states is 113, and nominal exchange rate is 64-1(INR-$). So what is the real exchange rate?

1. Is it $$RER = NER\times\frac{US\_{PriceLevel}}{INR\_{PriceLevel}}=273 \\ or \\RER = NER\times\frac{INR\_{PriceLevel}}{US\_{PriceLevel}}=16$$

I believe it should be the second one, because the price level in India is less than that in US so buying power of dollar should be less. Is this reasoning correct?

**Tags:** exchange-rates, price-level
> **Comments:**
> **username_1**: This a trivial question you could easily solve by not omitting the units of measurement.  
> **username_0**: That's exactly what I thought. I think price level should have units $(\$)^{-1}$ and $(inr)^-1$ and nominal exchange rate should be $(inr)/\$ $. Are these units correct?  
> **username_1**: Why do you think these are correct? Why do you think they are incorrect? The kind of questions you are posting to the site are [not a good match for a Stack Exchange](https://economics.meta.stackexchange.com/questions/1465/economics-se-policy-on-homework-questions). These should be broad questions about concepts and theory, not "I did this, is it ok?"  
> **username_0**: I am extremely new to this. I don't have enough understanding of the subject to write questions in a way that is broad and general. I am not really asking this for a homework or an assignment but to improve my understanding. I will ask better questions in the future but I have to get stupid ones out the way first right. PS: Just second week since I started macroeconomics.  
> **username_1**: I sympathize but that is not what this SE is for.  
> **username_0**: @denesp do you know of a forum where I can get such doubts clarified.  
> **username_1**: Sorry, I don't. Talking to classmates is always a good option though!  
> **username_0**: I am out of luck there. Out of college and doing this as a self study thing.  
> **username_1**: All I can do is reiterate my sympathies.  

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## 1 answers

### Answer by username_2 on 2018-02-09. Score: 1 | Accepted answer

Presumably one bundle of goods and services which costs about USD 113 in the United States would cost about USD 29 in India

so the bundle which costs about USD 113 in the United States would cost about INR 18546 in India at a market exchange rate of 64:1

suggesting a purchasing power parity of about INR 16.4 : USD 1

The [OECD calculations of PPPs](https://data.oecd.org/conversion/purchasing-power-parities-ppp.htm) suggest about 17:1 recently for India so this is the correct order of magnitude


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