Question

the belief that shift's in exchange rates result from increasing or decreasing demand for a country's...

the belief that shift's in exchange rates result from increasing or decreasing demand for a country's exports (or the corresponding opposite movements in supply of a country's import from the basis for the
select one
a purchasing power theory of exchange rates
b interest rate partiy theory of exchange rates
c balance of payments theory of exchange rates
d government intervention theory of exchange rates

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Answer #1

Option "C" is correct.

Purchasing power parity (PPP) is a theory of exchange rate determination and a way to compare the average costs of goods and services between countries.

Interest Rate Parity (IRP) is a theory in which the differential between the interest rates of two countries remains equal to the differential calculated by using the forward exchange rate and the spot exchange ratetechniques.

The balance of payments theory of exchange rate holds that the price of foreign money in terms of domestic money is determined by the free forces of demand and supply in the foreign exchange market.

A managed exchange rate occurs when there is officialintervention by a government or an agency such as the Central Bank to determination the value of a country'sexchange rate.

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