Advocates of a passive policy approach argue that an active stabilization policy imposes troubling fluctuations in the price level and real GDP because it often takes a hold only after market forces have already returned the economy to its potential output level

Assume the demand function for good X can be written as Qd = 80 - 3Px - 2Py + 10I where Px = the price of X, Py = the price of good Y, and I = Consumer income. This equation implies that X and Y are complements

Indicate whether the statement is true or false

Which of the following is a primary cause of exchange rate movements in the short run?

a. Changes in relative interest rates. b. Changes in expectations of future exchange rates. c. Changes in relative prices. d. Changes in economic conditions such as relative GDPs. e. None of the above.