Q. The terms “REER and NEER” are often seen in news related to which of the following?

[A] Exchange rate

[B] Inflation index

[C] Digital currency

[D] Agriculture supply chains

Answer: A

Explanation: NEER is the weighted average of bilateral nominal exchange rates of the home currency in terms of foreign currencies.

  • Conceptually, the REER, defined as a weighted average of nominal exchange rates adjusted for relative price differential between the domestic and foreign countries, relates to the purchasing power parity (PPP) hypothesis.
  • The Reserve Bank of India (RBI) has been constructing five-country and thirty-six-country indices of NEER and REER as part of its communication policy and to aid researchers and analysts. Theses indices are published in the Bank’s monthly Bulletin.

Source: https://www.rbi.org.in/scripts/BS_ViewBulletin.aspx?Id=7129