Exam 16: Price Levels and the Exchange Rate in the Long Run

Describe the chain of events leading to exchange rate determination for the following cases: (a)An increase in U.S.money supply (d)Increase in growth rate of U.S.money supply (c)Increase in world relative demand for U.S.products (d)Increase in relative U.S.output supply

Floating exchange rates

Which of the following statements is the MOST accurate? In general,under the monetary approach to the exchange rate

Which of the following are theories meant to explain "Why price levels are lower in poorer countries"?

Which of the following statements is the MOST accurate?

Interest rate differences between countries depend on

Does the existence of non-tradable goods allow for deviations from Purchasing power Parity?

Explain Purchasing Power Parity.

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 franc's exchange rate against the Russian ruble?

What effect do non-tradable goods have on PPP?

Describe and explain the relationship between expected inflation rates in two countries and their interest rate differential according to the PPP theory.

Which one of the following statements is the MOST accurate?

Who among the following list of people is an early 20th century economist from Yale University who wrote the book The Theory of Interest?

Under Purchasing Power Parity

An increase in the world relative demand for U.S.output causes

When all variables start out at their long-run equilibrium levels,the most important determinants of long-run swings in nominal exchange rates do NOT include

In practice

In the long run

Which of the following statements is MOST accurate?

Which of the following statements is the MOST accurate?