Exchange Rates Appear to Be More Volatile Than the Monetary

question 45

Multiple Choice

Exchange rates appear to be more volatile than the monetary approach would predict,because:

• A) the monetary approach holds better in the short run than in the long run.
• B) prices of goods and services adjust instantaneously, while prices of assets are sluggish.
• C) prices of goods and services are sluggish to adjust, while prices of assets adjust instantaneously.
• D) the monetary approach is based on many unrealistic assumptions so that it fails to predict exchange rates in both short run and long run.

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