E=exchange rate, H=Home, F=foreign

Usually exchange rate are expressed in units of home currency per units of foreign currency. (E H/F) But why for the real exchange rate, it is q F/H ?
This is really confusing.

The real exchange rate, expressed as q F/H, represents the relative price of goods and services between two countries. While the conventional exchange rate (E H/F) measures the value of one currency in terms of another currency, the real exchange rate takes into account the actual purchasing power of each currency.

To understand why the real exchange rate is expressed in q F/H, we need to consider the concept of purchasing power parity (PPP). PPP states that in the absence of trade barriers and transaction costs, the price of a basket of goods in one country should be equal to the price of the same basket of goods in another country, when both prices are expressed in the same currency.

Therefore, to calculate the real exchange rate, we need to compare the prices of goods and services in different countries. By expressing the real exchange rate as q F/H, we are comparing the price levels of goods in the foreign country (F) to the price levels of goods in the home country (H). This way, we can determine how much of the foreign currency is needed to purchase goods that cost one unit of the home currency.

In summary, the real exchange rate expressed as q F/H represents the relative purchasing power of two currencies, allowing us to compare the prices of goods and services between different countries.