In general,the basic Monetary Approach to Exchange Rate MAER does not capture the short run volatility of:
A) Prices
B) Money supply
C) Exchange rates
D) Foreign currency inflation

Question

Quizplus · Accepted Answer

The basic Monetary Approach to Exchange Rate (MAER) focuses on long-run relationships between money supply and exchange rates through the purchasing power parity (PPP) theory. It assumes that exchange rates adjust to the differences in national money supplies and inflation rates over the medium to long run. However, it does not capture the short-run volatility of exchange rates, which are influenced by other factors such as international capital flows, political events, market sentiment, and speculation. Therefore, the best choice is C - exchange rates.

In General,the Basic Monetary Approach to Exchange Rate MAER Does