Question

Over short periods, the ________ has a much greater role in exchange rate determination than does ________.

	A.	the liquidity of foreign assets; the price of foreign assets
	B.	the demand for exports and imports; decision to hold domestic or foreign assets
	C.	the price of foreign assets; the liquidity of foreign assets
	D.	decision to hold domestic or foreign assets; the demand for exports and imports

Answer 1

QUESTION

Over short periods, the ________ has a much greater role in exchange rate determination than does ________.

Here by understanding question and reading all option we can find the right answer is option D

Over short periods of time, the decisions to hold domestic or foreign financial assets play a much greater role in exchange rate determination than the demand for imports and exports does.

thus supply of a currency in the foreign exchange market is determined by the domestic demand for imports form other countries .