Multiple Choice
When we incorporate a relationship between expected inflation and liquidity preference (demand for real balances) into our long-run model, it can help to explain:
A) erratic shifts in exchange rates.
B) how changes in expectations can move the markets quickly.
C) why sometimes PPP seems not to hold in the short run.
D) erratic shifts in exchange rates, how changes in expectations can move the markets quickly, and why sometimes PPP seems not to hold in the short run.
Correct Answer:
Verified
Correct Answer:
Verified
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