The exchange rate is volatile because
A)the supply curve of dollars is vertical.
B)the demand curve for foreign exchange is very steep.
C)the supply of dollars and demand for dollars are influenced by similar events.
D)government policy promotes interest rate fluctuation.
E)the demand curve for foreign exchange is very flat.

Question

Quizplus · Accepted Answer

The supply and demand for dollars are influenced by similar events, such as changes in interest rates, economic growth, and political stability, which can lead to fluctuations in the exchange rate. This makes the exchange rate volatile and subject to sudden shifts. The other choices are either not accurate or not directly related to the volatility of the exchange rate.

The Exchange Rate Is Volatile Because