In the short run,exchange rates are most directly affected by which of the following?
A)flows of financial capital
B)purchasing power parity
C)trade barriers
D)imports and exports

Question

Quizplus · Accepted Answer

In the short run, exchange rates are most directly affected by flows of financial capital, such as foreign investment, speculation, and central bank intervention in currency markets. The demand and supply of a currency in the foreign exchange market determine its exchange rate relative to other currencies. Factors such as interest rates, economic indicators, political events, and market sentiment influence the flows of financial capital and thus the exchange rates. Purchasing power parity, trade barriers, and imports and exports can also affect exchange rates, but they may have slower and more indirect effects in the long run.

In the Short Run,exchange Rates Are Most Directly Affected by Which