a) Assuming that money market equilibrium always exists, if the national price level P increases by 5%, and real money demand L increases by 2%, then the nominal money supply M needs to increase by:
a. decrease by 7%.
b. decrease by 3%.
c. increase by 7%.
d. increase by 3%.
b) A real depreciation of the dollar against the euro occurs when:
a. there is a nominal depreciation of the US dollar against the euro which is at a higher rate than the US inflation rate, regardless of the European rate of inflation.
b. there is a nominal depreciation of the US dollar against the euro which is at a higher rate than the sum of the US inflation rate and the European inflation rate.
c. the cost of the US basket in terms of the European basket (European basket per US basket) rises, where "basket" refers to the basket of goods and services used in a country's price index.
d. there is a nominal depreciation of the US dollar against the euro which is at a higher rate than the European inflation rate, regardless of the US rate of inflation.
e. the cost of the European basket in terms of the US basket (US basket per European basket) rises, where "basket" refers to the basket of goods and services used in a country's price index.
a) Assuming that money market equilibrium always exists, if the national price level P increases by 5%, and real money demand L increases by 2%, then the nominal money supply M needs to increase by:
a. decrease by 7%.
b. decrease by 3%.
c. increase by 7%.
d. increase by 3%.
b) A real depreciation of the dollar against the euro occurs when:
a. there is a nominal depreciation of the US dollar against the euro which is at a higher rate than the US inflation rate, regardless of the European rate of inflation.
b. there is a nominal depreciation of the US dollar against the euro which is at a higher rate than the sum of the US inflation rate and the European inflation rate.
c. the cost of the US basket in terms of the European basket (European basket per US basket) rises, where "basket" refers to the basket of goods and services used in a country's price index.
d. there is a nominal depreciation of the US dollar against the euro which is at a higher rate than the European inflation rate, regardless of the US rate of inflation.
e. the cost of the European basket in terms of the US basket (US basket per European basket) rises, where "basket" refers to the basket of goods and services used in a country's price index.
