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1. Time frames of exchange-rate determination The determinants of exchange rate fluctuations are different in the short run, medium run, and long run. Which of the following influence short-run exchange rates? Check all that apply. O Cyclical factors O Transfers of assets that are sensitive to differences in real interest rates O Transfers of assets that are sensitive to the changing expectations of future exchange rates The following graph presents exchange rates as simultaneously determined by long-term structural, interim cyclical, and short-term speculative forces. ? 5 F D Complete the following table by indicating the exchange rate path for each graph element listed. B Graph Element Exchange Rate Path Grey area (w) Fundamental equilibrium path ong-run equilibrium path A (w) medium-run equilibrium path EXCHANGE VALUE short-run overshooting path Fundamental equilibrium path Long-run equilibrium path Green curve AB medium-run equilibrium path short-run overshooting path Fundamental equilibrium path 2005 2006 2007 2008 2009 2010 Long-run equilibriu YEAR medium-run equilibrium path Blue line CD short-run overshooting path

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