The market fundamentals that determine the exchange rate in the long run are
A)the real exchange rate and the quantities of money in each economy.
B)the interest rate differential and the world demand for exports.
C)expectations.
D)purchase power parity and interest rate parity.
E)the world demand for exports and the world demand for imports.

Question

Quizplus · Accepted Answer

In the long run, the exchange rate is determined by the real exchange rate and the relative quantities of money in each economy, as these factors influence the purchasing power and economic balance between countries.

The Market Fundamentals That Determine the Exchange Rate in the Long