Major supply shocks do not affect exchange rates.

Question

Quizplus · Accepted Answer

Major supply shocks, such as a sudden increase in oil prices or a natural disaster affecting production, can have a significant impact on a country's economy and its currency value. For example, if a country heavily relies on oil imports and the supply is suddenly disrupted, the cost of importing goods increases, which can lead to inflation and a depreciation in the currency value. Therefore, major supply shocks can influence exchange rates.

Major Supply Shocks Do Not Affect Exchange Rates