In the days before electronic market transactions, if only a few people had ready access to exchange-rate information, such as knowing the latest on euros per dollar or dollars per Mexican peso, then there was the possibility for
A) market forces to create fixed exchanged rates
B) government fixing exchange rates
C) arbitrage
D) exchange rate controls
E) unintentional trade deficits

Question

Quizplus · Accepted Answer

Arbitrage opportunities arise when there is asymmetric information among participants in financial markets. If only a few people had access to the latest exchange-rate information, they could buy low and sell high across different markets, exploiting the price differences for profit.

In the Days Before Electronic Market Transactions, If Only a Few