Floating exchange rates are ____ in the short run?
Correct answer: C. volatile
- A. stable
- B. predictable
- C. volatile
- D. depreciating
Explanation
Floating exchange rates can respond rapidly to capital flows, speculation, interest-rate changes and expectations, making them volatile in the short run. They are not necessarily always depreciating or predictable.
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About Macroeconomics
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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