Theoretically, When a Currency Depreciates One Can Predict That

question 146

Multiple Choice

Theoretically, when a currency depreciates one can predict that

• A)the price level will rise and real GDP will rise.
• B)the price level will fall and real GDP will fall.
• C)real GDP will rise, but price change is not predictable.
• D)the price level will rise, but real GDP change is not predictable.

---

Definitions:

Backed by Gold

Refers to a currency that is guaranteed by gold reserves, meaning its value is supported by the amount of gold held by the issuing authority.

Paper Currency

Money in the form of paper notes issued by the government or central bank, representing a legal tender for transactions.

Medium of Exchange

A medium of exchange is a system or object that is widely accepted as payment for goods and services.

Transaction Costs

The expenses incurred when buying or selling goods or services, including costs of gathering information, negotiating, and enforcing contracts.