Short-run movements in nominal exchange rates are primarily due to:
A) changing prices of goods and services in the countries involved.
B) changing expected rates of return on domestic and foreign assets.
C) inflation differentials.
D) changes in exports.

Question

Quizplus · Accepted Answer

Short-run movements in nominal exchange rates are primarily due to changing expected rates of return on domestic and foreign assets. This is because investors move their funds to markets where they expect higher returns, which affects the demand for different currencies and thus their exchange rates.

Short-Run Movements in Nominal Exchange Rates Are Primarily Due To