Of the following,exchange rates depend the most upon relative
A)monetary systems
B)political systems
C)trade deficits
D)inflation rates between nations

Question

Quizplus · Accepted Answer

Exchange rates mainly depend on the inflation rates of different countries. Higher inflation in one country compared to another will result in the depreciation of the currency of the former. This is because the purchasing power of currency will decrease due to inflation. Therefore, inflation differentials between countries are the most significant factor that affects exchange rates. While monetary and political systems may indirectly impact exchange rates, their influence is not as significant as inflation rates. Trade deficits may also impact exchange rates, but only to a limited extent.

Of the Following,exchange Rates Depend the Most Upon Relative