Question

Illiquid currencies tend to exhibit ________ volatile exchange rate movements, as the equilibrium prices of their currencies adjust to ________ changes in supply and demand conditions.

Answer 1

Answer:

B) More; even minor

Explanation:

Illiquid (or exotic) currencies are foreign currencies that are not generally traded in exchange markets. They trade at very low volumes and are usually extremely volatile since both the demand and supply is very limited. Since there are very few suppliers and consumers of exotic currencies, any additional transaction can result in large changes in their value.