Final answer:
The exchange rate according to the monetary approach is represented as S=(Mₛ/Mₑ)×(Vₛ/Vₑ)×(Yₑ/Yₛ), which balances money supplies, velocities, and output levels between countries. A merged currency, like the euro, eliminates the need for an exchange rate between member countries.
Thye correct answer is d.
Step-by-step explanation:
According to the monetary approach, the correct expression for the exchange rate can be represented as d) S=(Mₛ/Mₑ)×(Vₛ/Vₑ)×(Yₑ/Yₛ). This formula indicates that the exchange rate S between two countries is determined by the ratio of money supplies M, the ratio of velocities V, and the inverse ratio of the income levels or outputs Y of the respective countries.
The monetary approach is based on the principle that the exchange rate is determined like any other price, through the balance of supply and demand in the foreign exchange markets. The integration of a merged currency, such as the euro in the European Union, eliminates the need for an exchange rate between the member countries because they all share the same currency.