Question

The ________ approach states that the exchange rate is determined by the supply and demand for national currency stocks, as well as the expected future levels and rates of growth of monetary stock.A) balance of payments B) monetary C) asset market D) law of one price

Answer 1

Answer: Option (B)

Step-by-step explanation:

The monetary approach tends to undertake that the exchange rates are fixed, under this the economy of an nation is in the mode of long run where it has achieved the full-employment equilibrium, the demand for the money is known as the function of income which is stable. The changes taking place in supply side of money does not affect the real variables, that is in long run an nation's price level and the interest rate converge to that of the world level.