Which of the following is TRUE about exchange rates?

Question

Quizplus · Accepted Answer

Exchange rates should be volatile because they need to quickly adjust in response to economic news to provide accurate price signals. However, they are generally less volatile than stock prices. Option A is incorrect because exchange rates can be volatile and still determine the economic climate. Option B is incorrect because exchange rates can be less volatile than stock prices. Option C is incorrect because exchange rates are generally more volatile than underlying factors such as money supplies and fiscal variables. Option E is incorrect because exchange rates can overreact to economic news.

Which of the Following Is TRUE About Exchange Rates