Investor expectations about likely future exchange rates have a tendency to become __________.

Question

Quizplus · Accepted Answer

Investor expectations about future exchange rates can become self-fulfilling prophecies because their actions based on those expectations can impact the actual exchange rates. For example, if investors expect a currency to depreciate in the future, they may sell that currency, causing it to actually depreciate. This reinforces their initial expectations, creating a self-fulfilling prophecy. The other options (A, B, D, and E) do not accurately describe this phenomenon.

Investor Expectations About Likely Future Exchange Rates Have a Tendency