The Monetary Approach Predicts That an Increase in the Money

question 9

Multiple Choice

The monetary approach predicts that an increase in the money supply by 12 percent in both China and Thailand will:

• A)result in an appreciation of the Thai baht against the Yuan.
• B)result in a depreciation of the Thai baht against the Yuan.
• C)have no effect on the baht per Yuan exchange rate.
• D)lower the volume of trade between Thailand and China.

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Definitions:

Relatively Inelastic

Relatively inelastic refers to a situation where the demand for a good or service changes little when its price changes; the percentage change in demand is smaller than the percentage change in price.

Perfectly Elastic

This term describes a situation in market economics where the quantity demanded or supplied responds infinitely to changes in price.

Relatively Elastic

Describes a situation where the quantity demanded or supplied changes significantly in response to a change in price.

Unit Elastic

A demand or supply situation where a percentage change in price leads to an equal percentage change in the quantity demanded or supplied.