During the U

Multiple Choice

During the U.S. Civil War (1861-1865) , the Confederate States printed their own currency. Events occurred during the war that affected the exchange value of the Confederate dollars. What evidence was there that supports the theory of long- and short-run exchange rate determination?

A) The Union soldiers burned Confederate dollars at every opportunity, making them more valuable than the Union dollar.
B) The Confederate dollar became worth more as it became clear that the South would lose, because the Confederacy's dollars would become collectibles.
C) The Confederate dollar's value was closely linked to the difference in the deposit rates in southern states' banks.
D) Speculators traded for profit and based their valuation on the long-run expectation of the exchange rate, which tracked closely the probability of a victory for the South.