Which of the Following Conditions Do NOT Exist in Long-Run

question 125

Multiple Choice

Which of the following conditions do NOT exist in long-run equilibrium?

• A) Domestic nominal interest rates are such that the supply of real balances is equal to demand.
• B) The domestic real return is equal to the foreign real return through the equilibrium exchange rate.
• C) There are no price level or exchange rate changes and therefore the expected future exchange rate is equal to the actual exchange rate.
• D) Domestic nominal interest rates are such that the supply of real balances is greater than demand.

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Definitions:

Permeability

A measure of how easily fluids can flow through a porous rock or material.

Uncompacted Clays

Clay material that has not been subjected to pressure, typically soft and easily deformed, often leading to stability issues in construction.

Porosity

The measure of empty spaces within rocks or soil, determining their ability to absorb and hold water or other fluids.

Permeability

The measure of how easily fluids can pass through a material's pore spaces or fractures.