Exchange Rates and Currency Depreciation Quiz
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Questions and Answers

What is the long run rate of depreciation of a currency relative to another nation?

  • The sum of population growth plus technology growth.
  • The difference between the nominal money supply growth rates in each nation minus the difference between growth rates of real GDP. (correct)
  • The sum of nominal money supply growth rates in each nation.
  • The average of growth rates of real GDP in each nation.

    • What factors determine the long run rate of depreciation of a currency?

  • Nominal money supply growth rates
  • Real GDP growth rates (correct)
  • Population growth and technology growth
  • All of the above

    • What is the relationship between relative PPP and the simple monetary model of exchange rates?

  • The simple monetary model of exchange rates is a subset of relative PPP.
  • Relative PPP is identical to the simple monetary model of exchange rates.
  • They are unrelated concepts.
  • Relative PPP is a subset of the simple monetary model of exchange rates. (correct)

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