# Real exchange rate

I have a doubt: I'm studying about real exchange rates and I'm having some problem with the formula.

RER= NER* price ratio

What I don't understand is how do you take this price ratio? Which price appears in the numerator and which one in the denominator?

E.g. if you are calculating the real exchange rate between the US and the Eurozone $$\text{RER} = 0.88 \frac{\text{EUR}}{\text{USD}} \frac{p_{\text{US}}}{p_{\text{EZ}}}.$$ Since $$p_{\text{US}}$$ is measured in USD, and $$p_{\text{EZ}}$$ is measured in EUR, this is the only way RER will make sense. If you calculated $$0.88 \frac{\text{EUR}}{\text{USD}} \frac{p_{\text{EZ}}}{p_{\text{US}}}$$ you would get something that is measured in EUR$$^2/$$USD$$^2$$, which would be very strange indeed.