Research shows that when exchange rates are more volatile, the price differentials are ____ and the convergence is _____.
A) smaller; faster
B) smaller; slower
C) larger; slower
D) larger; faster

Question

Quizplus · Accepted Answer

When exchange rates are more volatile, the price differentials tend to be larger due to the increased risk and uncertainty in currency values. This volatility also makes convergence slower because the unpredictability in exchange rates makes it harder for prices to adjust and align quickly.

Research Shows That When Exchange Rates Are More Volatile, the Price