The ________ argues that exchange rates are determined by the supply and demand for a wide variety of financial assets
A) balance of payments
B) monetary
C) asset market
D) law of one price

Question

Quizplus · Accepted Answer

The asset market theory argues that exchange rates are determined by the supply and demand for a wide variety of financial assets, such as stocks, bonds, and currency. This theory suggests that exchange rates can fluctuate based on changes in the perceived value of these assets, which can be influenced by factors such as interest rates, inflation, and political stability. The balance of payments theory focuses on the overall balance of a country's international transactions, while the monetary theory emphasizes the role of monetary policy in determining exchange rates. The law of one price states that identical goods should have the same price in different countries when expressed in the same currency.

The ________ Argues That Exchange Rates Are Determined by the Supply