To complete the theory of exchange rates, a model should be created that:
A) accommodates short-run changes in variables.
B) accommodates long-run changes in variables.
C) accommodates changes in expectations.
D) accommodates short-run and long-run changes in variables and changes in expectations.

Question

Quizplus · Accepted Answer

A complete model of exchange rates should take into account both short-run and long-run changes in variables, as well as changes in expectations. This will provide a more accurate depiction of the factors that affect exchange rates over time.

To Complete the Theory of Exchange Rates, a Model Should