Which of the following is false with regard to exchange rate dynamics:
A)seeks to explain exchange rate fluctuations over time
B)results because the real sector adjusts instantaneously to disturbances
C)in the short run,the exchange rate overshoots its long-run equilibrium
D)results from the stock adjustment in financial assets

Question

Quizplus · Accepted Answer

Exchange rate dynamics do not necessarily result from the real sector adjusting instantaneously to disturbances. Other factors such as changes in interest rates, inflation expectations, and political factors can also impact exchange rate dynamics.

Which of the Following Is False with Regard to Exchange