If Price Expectations Are Assumed to Be Correct, Money Demand

question 18

Multiple Choice

If price expectations are assumed to be correct, money demand is proportional to income, and there are no international capital flows, then the big, comprehensive model in the appendix to Chapter 14 corresponds to which of the following special cases?

• A)classical closed economy
• B)classical open economy
• C)IS-LM model
• D)Mundell-Fleming model with floating exchange rate

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