Exchange rate determination in the short run is underlied by which of the following?
A) Tariffs and quotas affect trade patterns only in the short run.
B) Prices of goods and services affect trade patterns only in the short run.
C) Expected returns on financial assets affect investment flows in the short run.
D) Preferences for goods and services affect trade flows only in the short run.

Question

Quizplus · Accepted Answer

Exchange rate determination in the short run is primarily influenced by factors such as expected returns on financial assets, speculation, and changes in interest rates, which in turn affect investment flows. Tariffs and quotas, preferences for goods and services, and prices of goods and services may have an impact on trade patterns, but their effect on exchange rates in the short run is generally limited.

Exchange Rate Determination in the Short Run Is Underlied by Which