lyric1310
contestada

(05.06 MC)
Which of the following is the main cause of changes in foreign exchange rates?
Types of resources in a country
Supply and demand
A conversion proportion
Imports and exports​

Respuesta :

jojoharrington68
Supply and Demand

Explanation
Aside from factors such as interest rates and inflation, the currency exchange rate is one of the most important determinants of a country's relative level of economic health. Exchange rates play a vital role in a country's level of trade, which is critical to most every free market economy in the world. For this reason, exchange rates are among the most watched, analyzed and governmentally manipulated economic measures. But exchange rates matter on a smaller scale as well: they impact the real return of an investor's portfolio. Here, we look at some of the major forces behind exchange rate movements.

Supply and demand is the main cause of changes in foreign exchange rates.

What is supply and demand?

In economics, the relationship between the quantity of a good or service that producers want to sell at different prices and the quantity that consumers want to buy is known as supply and demand. It serves as the primary model for determining prices in economic theory.

What is foreign exchange rate?

The price of the domestic currency relative to another currency is referred to as the foreign exchange rate. Comparing different currencies to demonstrate their relative values is the goal of international exchange.

The rate at which one currency is exchanged for another or the price of one currency expressed in terms of another currency are two other definitions of the foreign exchange rate.

There are two types of exchange rates: fixed and variable. The country's central bank sets the fixed exchange rate, while the dynamics of market demand and supply set the floating rate.

Exchange rate influencing variables

There are a number of factors that affect exchange rates, including economic, political, and psychological ones. Inflation, trade balances, and government policies are established economic variables that affect foreign exchange values.

Political unrest, national instability, and any political conflict are all political issues that might affect the foreign exchange rate.

The psychology of the participants in foreign exchange is one of the psychological variables that affects the forex rate.

Supporting answer

Hence option B is correct answer

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