Economics · Foreign Exchange
In a genuinely market-determined exchange-rate regime, which one of the following best explains movements in the value of a country's currency?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1A pre-announced parity maintained automatically by the monetary authority without market adjustment.
- 2The interaction of trade-related foreign-exchange demand and supply, capital flows, and market expectations.✓
- 3Capital-market expectations alone, since trade transactions do not materially affect the spot rate.
- 4Export receipts alone, since current-account transactions dominate all other flows.
Correct answer
The interaction of trade-related foreign-exchange demand and supply, capital flows, and market expectations.
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