One of the Most Fundamental Determinants of the Exchange Rate

question 104

Multiple Choice

One of the most fundamental determinants of the exchange rate is ______________ whereby the exchange rate between the currencies of two countries is in equilibrium when it equates the prices of a basket of goods and services in both countries.

• A)free float
• B)free float (dirty)
• C)managed float
• D)purchasing power parity (PPP)
• E)absolute cost advantage

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Definitions:

Elements of Control

Factors or conditions that grant an entity the power to govern the financial and operating policies of another entity, typically to benefit from its activities.

Relevant Activities

Activities that significantly affect the returns of an investment or project under consideration.

Funding Structure

Refers to the composition of an organization’s capital, including the mix of its debt and equity financing.

Parent Entity

A company that holds a controlling interest in one or more subsidiaries, giving it control over their operations and policies.