The asset market view of exchange rate determination does NOT statee that the spot rate
A)should follow a random walk
B)is affected primarily by a nation's long-run economic prospects
C)is influenced by a nation's annual economic growth
D)should be strongly affected by a nation's balance of trade

Question

Quizplus · Accepted Answer

The asset market view of exchange rate determination suggests that the spot rate is primarily influenced by a nation's long-run economic prospects, but not by its annual economic growth. Additionally, it states that the spot rate should not necessarily follow a random walk, but rather be affected by factors such as interest rates, inflation, and political stability. However, it does not suggest that the spot rate should be strongly affected by a nation's balance of trade, as this is just one of many factors that can influence exchange rates.

The Asset Market View of Exchange Rate Determination Does NOT