A Country That Relies on Technical Analysis for Forecasting Exchange

question 83

Multiple Choice

A country that relies on technical analysis for forecasting exchange rate movements would know that

• A) price and volume data cannot be used to determine past trends.
• B) econometric models drawn from economic theory are best suited to predict exchange rate movements.
• C) the foreign exchange market is efficient and forward exchange rates are the best predictors of future spot exchange rates.
• D) previous market trends and waves can be used to predict future market trends and waves.
• E) since forward exchange rates are the best predictors of future spot rates, it makes no sense to invest in forecasting.

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Definitions:

Elastic

Describes a situation in which the demand or supply for a good or service significantly changes in response to changes in price.

Consumer Surplus

The discrepancy between the total sum consumers are prepared and capable of spending on a product or service and the actual total sum they end up paying.

Price Ceiling

A price ceiling is a government-imposed limit on how high a price can be charged for a product, service, or resource, usually set below the market equilibrium price to make goods more affordable.

Market Equilibrium

A point in a market where the quantity of goods supplied is equal to the quantity of goods demanded.