Which of the following approaches to exchange rate determination postulates that the exchange rate is determined in the process of equilibrating the total demand and supply of the national currency in each nation?

Question

Quizplus · Accepted Answer

The monetary model of exchange rates posits that the exchange rate is determined by the demand and supply of different currencies, which in turn are influenced by factors such as relative money supplies, inflation rates, and interest rates in the respective countries. This model emphasizes the role of national monetary policies in determining exchange rates.

Which of the Following Approaches to Exchange Rate Determination Postulates