Considerable day-to-day volatility in major exchange rates is caused by
A) shifts in tastes or preferences for domestic versus foreign goods.
B) international capital mobility and expectations of future exchange rates.
C) sudden changes in productivity in one nation versus others.
D) highly variable inflation rates in some industrialized countries.

Question

Quizplus · Accepted Answer

International capital mobility and expectations of future exchange rates are major drivers of day-to-day volatility in major exchange rates. The flow of capital between countries is influenced by constantly changing economic and political conditions, as well as investors' expectations of future exchange rate movements. These factors can cause significant fluctuations in exchange rates over short periods of time. While the other options listed can also impact exchange rates over the longer term, they are less likely to cause day-to-day volatility.

Considerable Day-To-Day Volatility in Major Exchange Rates Is Caused by