In fact, several studies focused on Europe concluded that higher exchange rate volatility:
A) is associated with smaller price differentials.
B) is associated with larger price differentials.
C) often precedes a return to stability.
D) promotes trade and cooperation among nations.

Question

Quizplus · Accepted Answer

Studies have shown that higher exchange rate volatility is associated with larger price differentials. This is because when exchange rates fluctuate frequently, prices take longer to adjust and businesses may have to absorb some of the costs, leading to larger price differentials between countries.

In Fact, Several Studies Focused on Europe Concluded That Higher