What factors can change expectations about the exchange rate?
A) interest rate parity
B) purchasing power parity
C) real GDP parity
D) Both answers A and B are correct.

Question

Quizplus · Accepted Answer

Interest rate parity and purchasing power parity are key factors that can change expectations about the exchange rate. Interest rate differentials between countries can influence capital flows, affecting exchange rates. Purchasing power parity relates to the relative price levels between countries, influencing trade balances and exchange rates. Real GDP parity is not a standard economic concept affecting exchange rate expectations directly.

What Factors Can Change Expectations About the Exchange Rate