Consulting firms that use large-scale econometric models to forecast exchange rate movements are engaging in ?
Correct answer: B. fundamental analysis
- A. judgmental analysis
- B. fundamental analysis
- C. technical analysis
- D. nontechnical analysis
Explanation
Fundamental analysis uses economic data and large-scale models, including income, prices, interest rates, and balance-of-payments variables, to forecast exchange rates. Technical analysis instead relies mainly on historical price patterns.
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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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