The dominant forces causing changes in exchange rates in the very short run are
A) changes in relative interest rates
B) changing expectations regarding future exchange rates
C) economic fluctuations
D) the erratic spending patterns of tourists
E) changes in relative interest rates and in expectations of future exchange rates

Question

Quizplus · Accepted Answer

Changes in relative interest rates and expectations of future exchange rates are the dominant forces causing changes in exchange rates in the very short run. While economic fluctuations can also have an impact, they typically play a larger role in the longer term. Tourist spending patterns are unlikely to have a significant impact on exchange rates in the short run.

The Dominant Forces Causing Changes in Exchange Rates in the Very