Briefly Explain the Main Theories of Exchange Rate Movements and Identify

question 86

Essay

Briefly explain the main theories of exchange rate movements and identify which have been most relevant to the AUD in recent years.

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Definitions:

Habituation

The mechanism by which an entity lessens or discontinues its replies to a repetitive signal with the passage of time.

Decreased Anxiety

refers to the reduction in feelings of worry, nervousness, or unease typically about an imminent event or something with an uncertain outcome.

Sensitization

The process of becoming more sensitive to a particular stimulus over time, often as a result of repeated exposure.

Readiness

A state of being fully prepared or in a suitable condition for an immediate action or use.