In the long run,________ dominate exchange rate movements.
A)short-run inflation differentials
B)long-run inflation differentials
C)short-run relative price changes
D)All of the above

Question

Quizplus · Accepted Answer

In the long run, long-run inflation differentials dominate exchange rate movements. Short-run inflation differentials and short-run relative price changes may have an impact on the exchange rate in the short term, but over time the impact is overshadowed by the long-term inflation differentials.

In the Long Run,________ Dominate Exchange Rate Movements