To complete the theory of exchange rates, a model should be created that:
a. accommodates short-run changes in variables.
b. accommodates long-run changes in variables.
c. accommodates changes in expectations.
d. accommodates short-run and long-run changes in variables and changes in expectations
Ans: d. accommodates short-run and long-run changes in variables and changes in expectations
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For foreign direct investment to occur, the purchase has to be more than
A) 8 percent but less than 10 percent of shares in a business located abroad. B) 5 percent but less than 10 percent of shares in a business located abroad. C) 10 percent of shares in a business located abroad. D) 2 percent but less than 5 percent of shares in a business located abroad.
If the spot exchange rate between dollars and pounds is equal to 2 dollars for one pound and the forward exchange rate equals 2.10 dollars for one pound, then
A) the dollar is trading at a forward premium. B) the pound is trading at a forward discount. C) the pound is trading at a forward premium. D) the market presents an opportunity for arbitrage.