Which of the following statements describes the Currency Substitution Approach?
A) As expectations of a trade deficit change, the exchange rate today will change due to the expected change in asset holdings.
B) Exchange rate adjusts to compensate for changes in international currency portfolios.
C) Slowly adjusting goods prices may cause the exchange rate to over-react in the short run.
D) All of the above are correct.
Correct Answer:
Verified
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