Which of the following is NOT an implication of the theory of purchasing power parity?
A) Exchange rates move to equalize the purchasing power of different currencies.
B) Exchange rates should be at a level that makes it possible to buy the same amount of goods and services with the equivalent amount of any country's currency in the long run.
C) A country with a higher inflation rate should experience an appreciation of its currency.
D) The real exchange rate should equal one.
C
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An increase in the money supply will cause
A) the IS curve to shift down and to the right. B) the IS curve to shift up and to the left. C) the LM curve to shift down and to the right. D) the LM curve to shift up and to the left.
If you are living in a period of continued high inflation on a fixed income, the cost of the goods and services you buy ____ and your nominal income ____
a. decreases, decreases b. increases, increases c. decreases, remains the same d. increases, remains the same