A Random Walk Model Can More Accurately Predict Exchange Rates

question 26

Multiple Choice

A random walk model can more accurately predict exchange rates as compared to a sophisticated forecast

• A) always.
• B) for forecasts up to a year away.
• C) for forecasts longer than a year away.
• D) never.
• E) because of the predictability of exchange rates.

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Definitions:

Quantity Supplied

The total amount of a specific good or service that producers are willing and able to sell at a given price over a certain period of time.

Real Gross Domestic Product

Real Gross Domestic Product (Real GDP) measures the value of all goods and services produced by an economy over a specific period, adjusted for inflation, reflecting the actual growth in economic output.

Price Level

An average of the current prices of goods and services in an economy, which can fluctuate with changes in production, demand, and inflation.

Laissez-Faire

An economic philosophy of free-market capitalism that opposes government intervention.