Monetary Policy Is Neutral in the Long Run Even in an Open

question 40

Multiple Choice

Monetary policy is neutral in the long run even in an open economy in part because

• A) price adjustments eventually return the nominal and real exchange rates to their original levels.
• B) price adjustments eventually return the real exchange rate to its original level by depreciating the nominal rate by the rate of inflation.
• C) potential GDP is always achieved in the long run even if the real and nominal exchange rates are altered.
• D) all the stimulus eventually leaks out into the rest of the world.
• E) none of the above.

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