Q.3 What is a real effective exchange rate (REER)? What are the biases involved in REER? (10 Marks)

Mentor’s Comments- https://www.livemint.com/Opinion/6nlCPOcpAw2l0MKUZfv8AN/Is-the-rupee-overvalued-or-undervalued.html In the intro, mention that the exchange rate of currency influence the economy. In the body, explain REER and the two biases involved in it. Conclude by mentioning the need to account for financial, social, and political factors to get a better grasp of how economies actually work