Which of the following is true in the short run?
A) Short-term interest rates are fixed.
B) Prices are flexible.
C) Long-run expectations of the exchange rate are unchanged.
D) Monetary shocks are deemed permanent.

Question

Quizplus · Accepted Answer

In the short run, long-run expectations of the exchange rate are generally unchanged because these expectations are based on long-term factors such as economic growth, inflation rates, and political stability. Short-term fluctuations in the exchange rate do not typically alter these long-term expectations significantly.

Which of the Following Is True in the Short Run