Which of the Following Is Correct About the 'News' Approach

question 14

Multiple Choice

Which of the following is correct about the 'news' approach to exchange rate determination?

• A) Government must control the news to prevent excessive exchange rate volatilities.
• B) News reduces the information costs and thus stabilizes the exchange rate movements.
• C) News make people act irrationally.
• D) News affects people's expectations about the future, causing high swings in exchange rates.

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Definitions:

Deposition

The process by which sediments, minerals, and rocks are added to a landform or landmass, typically by wind, water, or ice.

Profile

A description or analysis of something that presents its key characteristics or qualities.

Headwaters

The location or general area where a stream or river begins.

Perennial

Describes plants that live for more than two years or streams that flow continuously throughout the year.