If the economy starts in long-run equilibrium,
If the economy starts in long-run equilibrium, a permanent fiscal expansion will causeA.an increase in exchange rate,B.a decrease in exchange rate,C.an increase in output,D.a decre...
The J-curve illustrates which of the following?
A.The effects of depreciation on the home country's economyB.The immediate increase in the current account caused by a currency depreciationC.The gradual adjustment of home prices ...
Suppose Russia’s inflation rate is 200%
Suppose Russia’s inflation rate is 200% over one year, but the inflation rate in Switzerland is only 2%. According to relative PPP, what should happen over the year to the Swiss f...
You are planning a 30-day vacation on Langkawi Island,
You are planning a 30-day vacation on Langkawi Island, Malaysia, one year from now. The present charge for a luxury suite plus meals in Malaysian ringgit (RM) is RM1,050/day. The M...
Which of the following statements is the most accurate?
A.PPP appears to be of limited use as a short-run explanation of exchange rate movements.B.PPP appears to be of limited use even as a short-run explanation of exchange rate movemen...
The PPP theory fails in reality because
A.transport costs and restrictions onB.monopolistic or oligopolistic practices in goodsC.the inflation data reported in different countries are based on different commodityD.A, B, ...
Under sticky prices,
A.a fall in the money supply raises the interest rate to preserve money market equilibrium.B.a fall in the money supply reduces the interest rate to preserve money market equilibri...
Which of the following statements is the most accurate?
A.Relative PPP is not a reasonable approximation to theB.Relative PPP is sometimes a reasonable approximation to the data but usually performsC.Relative PPP is sometimes a reasonab...
In the short run,
A.the interest rate can rise when the domestic money supplyB.the interest rate can decrease when the domestic money supplyC.the interest rate stays constant when the domestic money...
Under PPP,
A.a rise in a country’s expected inflation rate will eventually cause a more-than proportional rise in the interest rate that depositors of its currency offer in order to accommod...
Under the monetary approach to the exchange
Under the monetary approach to the exchange rate theory, money supply growth at a constant rateA.eventually results in ongoing price level deflation at the same rate, but changes i...
If people expect relative PPP to hold,
A.the difference between the interest rates offered by dollar and euro deposits will equal the difference between the inflation rates expected, in the United States and Europe, ove...
