In the long run, exchange rates are mainly determined by
A) the difference between short-run interest rates in each county.
B) the rate at which a country's currency exchanges for silver or gold.
C) agreements among governments in the major banking countries of the world.
D) market fundamentals, such as productivity levels or price levels in various countries.

Question

Quizplus · Accepted Answer

In the long run, exchange rates are mainly determined by market fundamentals, such as productivity levels or price levels in various countries. While short-run interest rates, gold and silver exchange rates, and government agreements can affect exchange rates in the short term, they are not the main drivers of long-term exchange rate movements.

In the Long Run, Exchange Rates Are Mainly Determined by