When there is a permanent fall in the foreign money supply, the exchange rate:
a. falls in the short run and rises slightly in the long run.
b. falls in the short run and falls more in the long run.
c. rises in the short run and falls slightly in the long run.
d. rises in the short run and rises more in the long run.
Ans: c. rises in the short run and falls slightly in the long run.
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Which of the following is true of the unit of account function of money? a. It makes money durable in nature
b. It makes the relative values of goods and services more easily known. c. It implies that money should be made of something valuable. d. It implies that money can be used to save up purchasing power. e. It implies that money is more easily counted than goods.
Suppose that the demand for apples in Washington is elastic and the supply is inelastic. If the government of Washington passes a law prohibiting the use of synthetic pesticides that increases the marginal and average costs of producing apples, then:
a. the price of Washington State apples will decline. b. Washington will stop producing apples, and New York apple growers will benefit. c. apple growers will pass most of the increased costs on to consumers in the form of higher apple prices. d. apple growers will keep prices constant but reduce costs by advertising less. e. apple growers will bear most of the increased costs of regulation, and prices will increase only slightly.