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:

Federal Reserve Board

The governing body of the Federal Reserve System, responsible for overseeing the United States' monetary policy and regulating banks.

Deceptive Trade Practices

Unfair business practices that mislead or deceive consumers, usually regulated by laws to protect consumer rights.

Multiple Product Orders

The process or action of purchasing more than one item or service at a time from the same provider.

Corrective Advertising

Advertising designed to correct previous misleading or deceptive advertisements.