Which of the following is INCORRECT regarding foreign exchange rates?
The changes in the nominal foreign exchange rate may give you false information about the real purchasing power of a currency.
The real exchange rate is the nominal exchange rate with inflation effects factored in.
From the U.S. perspective, a decrease in the direct quote of the nominal exchange rate between U.S. dollar and Euro indicates a relative appreciation of U.S. dollar against Euro.
From the U.S. perspective, an increase in the direct quote of the nominal exchange rate between U.S. dollar and Euro indicates a relative appreciation of U.S. dollar against Euro.