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Exam questions - Chapters 7, 8 and 9
According to Milton Friedman "inflation is always and everywhere a monetary phenomenon". This paradigm refers to the fact that
in the long run money is neutral
in the long run nominal variables are equal to real variables
monetary policy is an efficient stabilization policy instrument
the Central Bank can influence the real economy only in the long run
The Quantity Theory of Money implies that an increase in the money supply causes:
a proportional increase in the velocity of money
a proportional increase in real income
a proportional increase in prices
a proportional decrease in nominal income
If exchanges rates are determined by PPP theory, then:
The real exchange rate is determined by the ratio of relative prices between the home and foreign country.
The nominal exchange rate is determined by the ratio of relative prices between the home and foreign country.
Prices of Big Macs are the same in every country.
An increase in NCO will lead to a depreciation of the domestic currency.
Assume that the law of one price holds for all goods. Which of the following statements is true ? I. The real exchange rate is 1. II. There is no further possibility for arbitrage between currencies. III. The nominal exchange rate between the currencies of two countries is equal to the relative price level of the two countries.
Propositions I and II are correct.
Propositions I and III are correct.
Propositions II and III are correct.
All of the propositions are correct.
Université de Genève
