In chapter 21,the expected future nominal exchange rate in the long run say,Eet+n,is assumed to be the nominal exchange rate at which
A)the current account is in balance.
B)the future rate of appreciation or depreciation is constant.
C)domestic and foreign price levels are equal.
D)one unit of foreign currency exchanges for one unit of domestic currency.
E)none of the above

Question

Quizplus · Accepted Answer

The correct answer is A because in the long run, the exchange rate is expected to adjust to a level where the current account is in balance.

In Chapter 21,the Expected Future Nominal Exchange Rate in the Long