In general, exchange rates
A) are determined by the planning agencies of governments.
B) are determined by demand and supply.
C) adjust slowly to equilibrium.
D) are determined by central banks.

Question

Quizplus · Accepted Answer

Exchange rates are primarily determined by the demand and supply of a currency in the foreign exchange market. Factors that affect demand and supply include trade flows, investment flows, geopolitical events, and macroeconomic indicators. While central banks can influence exchange rates through their monetary policies and interventions in the foreign exchange market, they do not have complete control over them. Exchange rates can also adjust quickly to changes in demand and supply, depending on market conditions. Planning agencies of governments do not have a direct role in determining exchange rates.

In General, Exchange Rates