Which statement makes sense?
A) Fixing exchange rates causes currency markets to reach equilibrium quickly.
B) Having an absolute advantage in the production of goat cheese means the country will specialize in and produce all of the goat cheese traded.
C) Arbitrage opportunities are quickly taken.
D) Floating exchange rates reduce uncertainty in the currency markets.
E) When the dollar depreciates, U.S. consumers can buy more imported goods.

Question

Quizplus · Accepted Answer

Arbitrage opportunities, which are the chance to buy low in one market and sell high in another, are typically exploited very quickly by traders. This is because the potential for profit incentivizes rapid action, leading to the equalization of prices across markets.

Which Statement Makes Sense