All of the Following Statements Are True About the Real $\frac{P^{*}}{P}$

question 41

Multiple Choice

All of the following statements are true about the real exchange rate,given by the relation R_r = R_n ( $\frac{P^{*}}{P}$ ) ,except

• A)a greater change in P (domestic price)compared to a change in \( P^{*} \)1 (foreign price)necessitates a rise in the nominal rate, R_n ,to keep the real rate unchanged.
• B)a pegged exchange rate system requires tight control of the money supply.
• C)there is a one-to-one correspondence between the real and nominal exchange rates.
• D)an expansionary monetary policy raises the real exchange rate.
• E)the real exchange rate would be the same as the nominal exchange rate only if the difference between domestic and foreign inflation rates is zero.

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Definitions:

Influence Tactics

Strategies or methods used by individuals or groups to alter the behavior, attitudes, or opinions of others in a desired direction.

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An individual's belief in their capacity to execute behaviors necessary to produce specific performance attainments.

Empowered

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Ingratiation

A psychological technique involving the use of deliberate flattery or friendliness by someone seeking to gain favor or approval from others.