In the long run,foreign exchange rates are determined by:

Question

Quizplus · Accepted Answer

Foreign exchange rates are primarily determined by economic fundamentals such as productivity levels, inflation rates, and price levels. Supply and demand for a currency also play a role in its exchange rate, with higher demand leading to appreciation and lower demand leading to depreciation. While government policies and interest rates can also influence exchange rates in the short term, the underlying economic conditions in each country ultimately determine the long-term trend. The gold standard, where currencies were backed by gold reserves, was abandoned by most countries in the mid-20th century, so option D is not a relevant factor in modern foreign exchange markets. Option A is also incorrect as there is no global agreement on exchange rates among governments.

In the Long Run,foreign Exchange Rates Are Determined By