Which of the following will cause a change in the exchange rate?
A) changes in real interest rates
B) changes in consumer preferences
C) changes in the perception of economic stability
D) all of the above

Question

Quizplus · Accepted Answer

All of the above factors can influence the exchange rate.

A) Changes in real interest rates can attract foreign investment and impact exchange rates. Higher interest rates can increase demand for a country's currency, leading to an appreciation in its exchange rate, while lower interest rates can decrease demand and lead to a depreciation.

B) Changes in consumer preferences, such as a preference for domestically produced goods over imports, can impact trade and flow of currency, ultimately affecting exchange rates.

C) Perception of economic stability can influence the level of foreign investment in a country, as well as the level of confidence in its currency. Changes in economic stability can cause fluctuations in exchange rates.

Which of the Following Will Cause a Change in the Exchange