If We Start from Long-Run General Equilibrium of Goods, Forex

question 81

Multiple Choice

If we start from long-run general equilibrium of goods, forex, and the money markets, and there is a temporary expansion of the money supply, what will be the outcome?

• A) GDP rises, the interest rate falls, and the exchange rate rises (depreciation).
• B) GDP rises, the interest rate rises, and the exchange rate falls (appreciation).
• C) GDP falls, the interest rate falls, and the exchange rate rises (depreciation).
• D) GDP falls, the interest rate rises, and the exchange rate rises (depreciation).

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Definitions:

Trade-Offs

Decisions made that involve choosing between benefits and drawbacks of different options, reflecting the concept of opportunity cost.

Resources

are assets, materials, or substances that are valuable for their utility in producing goods, providing services, or supporting life.

Esther Duflo

A French-American economist known for her research in development economics and for being the youngest person and the second woman to receive the Nobel Prize in Economic Sciences.

Abhijit Banerjee

An Indian-American economist who, along with Esther Duflo and Michael Kremer, won the Nobel Prize in Economic Sciences in 2019 for their work in development economics.