Solution-One of the major complaints regarding foreign

One of the major complaints regarding foreign exchange rates and flexible exchange rates is that the exchange rates are too volatile when they float.

• Define how the following contributes to volatility of the exchange rate:

o trade-balance

o currency substitution

o differential speed of adjustment of asset markets versus goods markets

o the news

• Explain each of the above.

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One of the major complaints regarding foreign exchange : one of the major complaints regarding foreign exchange rates and flexible exchange rates is that the exchange rates are

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