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