Three years ago, the U.S. dollar/euro exchange rate was 1.32 USD/EUR. Over the last three years, the price level in the United States has increased by 18%, and the price level in the eurozone has increased by 12%. If the current exchange rate is 1.40 USD/EUR, the real exchange rate over the period has:

For the base period, three years ago, the real exchange rate is the same as the nominal exchange rate, 1.32 USD/EUR. The real exchange rate over the period has changed from 1.32 to 1.40 x (112 / 118) = 1.3288. This increase in the real USD/EUR exchange rate indicates that the base currency (EUR) has appreciated in real terms so that eurozone goods are now more expensive in real terms to U.S. consumers.