The trade or elasticities approach stresses the role of trade or the flow of goods and services in the determination of exchange rates.

Question

Quizplus · Accepted Answer

The trade or elasticities approach states that the exchange rate is determined by the flow of goods and services between countries, and their relative price levels. This approach emphasizes the role of trade in the determination of exchange rates, as opposed to other factors such as interest rates or political events.

The Trade or Elasticities Approach Stresses the Role of Trade