The Dominant Forces Causing Changes in Exchange Rates in the Very

question 104

Multiple Choice

The dominant forces causing changes in exchange rates in the very short run are

• A) changes in relative interest rates
• B) changing expectations regarding future exchange rates
• C) economic fluctuations
• D) the erratic spending patterns of tourists
• E) changes in relative interest rates and in expectations of future exchange rates

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Definitions:

Cost Per Unit

The amount of financial expense associated with producing a single unit of a product or service.

Production

The process of creating goods and services through the combination of labor, capital, and resources.

Economic Profit

A measure of profit that includes recognition of implicit costs (like the cost of equity capital). Economic profit measures the true profitability of decisions.

Savings Account

A deposit account held at a bank or financial institution that pays interest but typically has limited withdrawal options.