Question

Q27

While macro factors impact exchange rate movements in the long term, investor psychology tends to be a more important factor in the short term.

T or F

Answer 1

Answer- The correct answer is TRUE. Marco economics factors include the economy of the whole nation and concentrates on factors that are large scale. Such factors include interest rates,inflation, repo rates etc. Things that affect exchange rates are inflation rates, interest rates, Balance of trade, debt held by the government, any other regulations of trade etc. Such factors are the factors of marco economics. These economic factors influence the demand and supply for a country’s currency and influences the exchange rate. Thus, it can be said that exchange rate movements are for a long term as it impacts the economy for a long term impact.

Investor economics studies the concept where the behaviour of people are studied over time for the economic decisions they made. Such behavioural decisions can be for investing, spending, savings etc. Humans make decision on the basis of rule of thumb ie., they don’t apply any specific logic , rather they apply their mind logics. Also, humans make decisions on the basis of hear and say ie., by listening to others. Such factors are considered on short term because of the nature of thinking applied to investing.