Which of the Following Is Most Important in Explaining Exchange

question 106

Multiple Choice

Which of the following is most important in explaining exchange rate fluctuations in the short run?

• A)relative price levels across countries
• B)preferences for domestic and foreign goods
• C)interest rates
• D)relative rates of productivity growth across countries
• E)government debt

---

Definitions:

Accrued Interest

Interest that has been earned but not yet received or recorded as of a specific date, often related to bonds or loans.

Investment in Bonds

Purchasing debt securities issued by corporations or governments to earn interest income and potentially benefit from bond price appreciations.

Available-for-Sale Securities

Financial assets that are neither classified as held-for-trading nor held-to-maturity, and whose value is subject to change; gains and losses are typically reported in other comprehensive income.

Fair Market Value

The price at which an asset would change hands between a willing buyer and a willing seller, both having reasonable knowledge of all relevant facts and neither being under compulsion to buy or sell.