Multiple Choice
According to historical data, what is the effect of a sharp change in the current account on the exchange rate (both in the short and long run) ?
A) At first, home currency will depreciate as CA balance falls, but over time, currency will begin to depreciate.
B) At first, home currency will appreciate as CA balance falls, but over time, currency will begin to depreciate.
C) At first, home currency will appreciate as CA balance rises, but over time, currency will begin to depreciate.
D) At first, home currency will depreciate as CA balance falls, but over time, currency will begin to appreciate.
E) At first, home currency will appreciate as CA balance falls, but over time, currency will begin to appreciate.
Correct Answer:
Verified
Correct Answer:
Verified
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