t n+ The expected future nominal exchange rate in the medium run, E e, is assumed to be the
Nominal exchange rate at which:
A) one unit of foreign currency exchanges for one unit of domestic currency.
B) domestic and foreign price levels are equal.
C) the current account is in balance.
D) the domestic currency is risk- free.
E) the future rate of appreciation or depreciation is constant.

Question

Quizplus · Accepted Answer

The expected future nominal exchange rate in the medium run is often assumed to be the rate at which the current account is in balance. This is because a balanced current account suggests that the exchange rate is at a level where the value of imports is equal to the value of exports, indicating a sustainable position that does not necessitate adjustments in the exchange rate to correct imbalances.

T N+ the Expected Future Nominal Exchange Rate in the Medium