If We Assume That Prices Adjust in the Long Run

question 73

Multiple Choice

If we assume that prices adjust in the long run so that the nominal demand for money equals the nominal supply of money, then:

• A) we can determine changes in exchange rates if absolute PPP holds.
• B) absolute PPP will hold.
• C) relative PPP will hold.
• D) exchange rates will not change.

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Definitions:

Founder Effect

A genetic phenomenon that occurs when a new population is established by a very small number of individuals, leading to a reduced genetic diversity.

Industrial Melanism

A phenomenon in which darker forms of species evolve in polluted environments, typically as a result of higher survival rate against predation.

Microevolution

Change in gene frequencies between populations of a species over time.

Gene Pool

The complete set of unique alleles in a population or species, representing its genetic diversity.