The behavior of exchange rates during the period 1999-2004 ____ predictable based on the short run asset model if we assume that changes in the money supply were assumed to be _________.
A) was not; temporary
B) was; temporary
C) was not; permanent
D) was; permanent

Question

Quizplus · Accepted Answer

The short run asset model suggests that if changes in the money supply are assumed to be temporary, exchange rates will adjust to reflect the expected reversal in monetary policy. Therefore, exchange rates during the period 1999-2004 could be predictable based on this assumption.

The Behavior of Exchange Rates During the Period 1999-2004 ____