The asset market approach views exchange rates as being determined mainly by ?
Correct answer: D. efforts of investors to balance their portfolios among financial assets denominated in different currencies
- A. the use of import tariffs and quotas by governments
- B. the current account balance of each country
- C. the relative growth rate of national output between countries
- D. efforts of investors to balance their portfolios among financial assets denominated in different currencies
Explanation
The asset market approach treats currencies as assets and emphasizes investors' attempts to balance portfolios across assets denominated in different currencies. Their relative demand for these assets determines exchange rates.
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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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