Order Flows and Exchange Rates

question 17

Multiple Choice

Order flows and exchange rates

• A) are correlated in the long run but not in the short run
• B) are correlated because foreign exchange markets have essentially perfect information and assimilate it quickly
• C) are correlated because traders interpret others' purchase orders as a signal to buy
• D) are both determined in the short run by macroeconomic forces
• E) are uncorrelated

---

Definitions:

Command Economy

An economic system where the government or a central authority makes all decisions regarding the production and distribution of goods and services.

Market Economy

An economic system in which supply and demand from consumers primarily control the production and distribution of goods and services.

Medium of Exchange

Any item sellers generally accept and buyers generally use to pay for a good or service; money; a convenient means of exchanging goods and services without engaging in barter.

Coincidence of Wants

A situation in barter economies where two parties each possess goods or services that the other desires, enabling a direct exchange without the need for a common medium of trade.