"Overshooting" exchange rate changes in response to an action of the Federal Reserve would be an example of
A) a market inefficiency.
B) a market efficiency.
C) the Fisher Effect.
D) none of the above.

Question

Quizplus · Accepted Answer

Overshooting exchange rate changes mean that the exchange rate moves more than what is necessary to balance the market after a change in monetary policy. This indicates a temporary market inefficiency as the exchange rate eventually adjusts to its equilibrium level.

"Overshooting" Exchange Rate Changes in Response to an Action of the Federal