An Exchange Rate Is Said to ____ When Its Short-Run

question 47

Multiple Choice

An exchange rate is said to ____ when its short-run response to a change in market fundamentals is greater than its long-run response.

• A) Overshoot
• B) Undershoot
• C) Depreciate
• D) Appreciate

---

Definitions:

Actual Inflation

The rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling, as it is currently being measured or experienced in the economy.

Unemployment Rate

The ratio of individuals in the labor force who are without a job and are searching for employment.

Expected Inflation

The rate at which the general level of prices for goods and services is projected to rise over a specific period, reflecting the public's expectations for future inflation.

Actual Inflation

The observed increase in prices for goods and services in an economy over a period, typically measured as a percentage.