Final answer:
An exchange rate is the price of one currency in terms of another, influenced by supply and demand in currency markets. It is not always quoted in real terms and does not ensure currency convertibility, although it encompasses both nominal and real value considerations.
Step-by-step explanation:
An exchange rate is the price of one currency expressed in terms of another currency. This concept is crucial in various fields such as economics, public policy, and business. However, contrary to option 'a', an exchange rate is not commonly quoted in real terms. Instead, as option 'b' correctly states, it is indeed the price of one currency in terms of another. The rate is influenced by the operation of supply and demand in currency markets, rather than option 'c' which inaccurately suggests that an exchange rate ensures full convertibility between two currencies. Lastly, option 'd' is incomplete as exchange rates reflect both nominal and real values, incorporating factors like inflation when considered in real terms.
To understand exchange rates better, it's important to recognize that they facilitate the conversion of one country's currency into another for the purposes of trade, investment, or when comparing GDP across countries using different currencies. An exchange rate could be expressed as, for instance, Japanese yen per British pound or vice versa. Notably, governments can influence exchange rates through trade policies, monetary policy actions like altering interest rates, or by changing exchange rate regimes.