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True or False: In the short run, changes in exchange rates are caused by relative productivity levels and preferences for domestic goods or foreign goods. True False

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Baraq

True: Over short periods of time, decisions to hold domestic or foreign financial assets play a much greater role in exchange rate determination than the demand for imports and exports does.

Further explanation

According to the asset market approach to exchange rate determination, investors consider two key factors when deciding between domestic and foreign investments: relative interest rates and expected changes in exchange rates. Changes in these factors, in turn, account for fluctuations in exchange rates that one observe in the short run.

learn more about asset market approach: https://brainly.com/question/8084221

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