If a particular currency is consistently declining substantially over time, then a market-based forecast of a currency in a developed country will usually have:
A)underestimated the future exchange rates over time.
B)overestimated the future exchange rates over time.
C)forecasted future exchange rates accurately.
D)forecasted future exchange rates inaccurately but without any bias toward consistent underestimating or overestimating.

Question

Quizplus · Accepted Answer

A consistently declining currency indicates that the market has consistently overestimated its value in the past. Therefore, a market-based forecast is likely to overestimate future exchange rates over time.

If a Particular Currency Is Consistently Declining Substantially Over Time