Inflation/Real interest rates/Purchasing power


Could you please help me with my understanding of the relationship between Inflation, Real interest rates, and Purchasing power.

According to CFAI p. 474:

“the real exchange rate that an individual faces is (…) a decreasing function of the domestic price level”

According to CFAI p. 475:

“the higher the price (real exchange rate), the lower your relative purchasing power”

So according to this:

Domestic inflation (higher prices) leads to a lower real exchange rate, leading to a higher purchasing power. However, this is - at least from my understanding - not right, because increasing inflation leads to decreasing purchasing power.

Could someone explain the relationship between these three factors and where my understanding is wrong?

Thanks in advance.

the real exchange rate is a theoratical rate states that the rate will balance the purchasing power in different markets that identical level of purchasing power can buy identical amount of products or assets.

thus, holding the foreign price level constant, if the domestic price level increase(inflation), the domestic purchasing power will decrease, and to balance this, the real exchange rete will decrease to make sure that the individual’s purchasing power is the same no matter what currency he is holding.

Besides, if the exchange rate decrease, that means the domestic currency is appreciating, if the rate is using foreign currency as denominator.