Which of the following approaches to exchange rate determination postulates that exchange rates are determined in the process of equilibrating or balancing the demand and supply of financial assets in each country?

Question

Quizplus · Accepted Answer

The portfolio model of exchange rates postulates that exchange rates are determined in the process of equilibrating or balancing the demand and supply of financial assets in each country. The trade approach to exchange rates views exchange rates as being determined by the forces of supply and demand in the foreign exchange market based on trade flows between countries. The elasticities approach emphasizes the role of price elasticities of demand and supply in determining exchange rates.

Which of the Following Approaches to Exchange Rate Determination Postulates