Under the monetary approach to exchange rates, if both real money demand and money supply are greater at home than in foreign markets, then the exchange rate should be:
A) greater than one.
B) equal to one.
C) less than one.
D) There is not enough information provided to answer the question.

Question

Quizplus · Accepted Answer

According to the monetary approach to exchange rates, if both real money demand and money supply are greater at home than in foreign markets, the exchange rate should be greater than one. This is because the increased demand for money at home relative to foreign countries will cause the home currency to appreciate in value, resulting in a higher exchange rate.

Under the Monetary Approach to Exchange Rates, If Both Real