Exchange rate behavior is:
A) unimportant in determining income, prices, and flows of goods and services.
B) very important in determining income, prices, and flows of goods and services.
C) very predictable, steady, and not of interest to policy makers.
D) not subject to market forces, but is determined by international agreements.

Question

Quizplus · Accepted Answer

Exchange rate behavior is very important in determining income, prices, and flows of goods and services. Fluctuations in exchange rates can affect imports and exports, which in turn affect the trade balance and economic growth. Exchange rate movements can also impact inflation and interest rates, which are important factors in determining economic outcomes. Therefore, exchange rate behavior is closely monitored by policy makers and economists.

Exchange Rate Behavior Is