What factors are most important for determining exchange rate fluctuations in the long run?
A)relative price levels across countries
B)relative rates of productivity growth across countries
C)preferences for domestic and foreign goods across countries
D)All of these options are correct.

Question

Quizplus · Accepted Answer

All of these factors - relative price levels, productivity growth, and preferences for domestic and foreign goods - can have significant impacts on exchange rate fluctuations in the long run. Relative price levels across countries can affect the competitiveness of a country's goods and services, while differences in productivity growth can impact a country's overall economic performance and demand for its currency. Preferences for domestic and foreign goods can also impact the demand for currencies, as consumers and businesses may choose to purchase goods from countries with more desirable goods and services or cheaper prices. In combination, these factors can help determine a country's relative position in the global economy and, ultimately, the value of its currency.

What Factors Are Most Important for Determining Exchange Rate Fluctuations