In the Foreign Exchange Market, a Change in Which of the Following

question 14

Multiple Choice

In the foreign exchange market, a change in which of the following will result in a movement along the demand curve for U.S. dollars?

• A) the U.S. interest rate
• B) the interest rate in the foreign country
• C) the expected future exchange rate
• D) the exchange rate

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Definitions:

Weak Form

In financial market theory, this term refers to the hypothesis that asset prices fully reflect all historical price information, arguing that past price movements are not predictive of future prices.

Market Efficiency

A concept describing the extent to which stock prices reflect all available, relevant information, making it impossible to consistently achieve higher returns.

Semi-strong Form

A form of the Efficient Market Hypothesis that asserts all public information is reflected in the stock prices.

Market Efficiency

Market efficiency is a concept where all available information is already reflected in asset prices, implying that assets are priced perfectly and it is impossible to "beat the market" through expert stock selection or market timing.