Which of the Following Statements About the Relationship Between Money

question 56

Multiple Choice

Which of the following statements about the relationship between money, prices, and exchange rates in the long run is NOT correct?

• A) Since money is neutral in the long run, real income growth has no effect on inflation or the nominal exchange rate for a nation.
• B) The rate of growth of prices (inflation rate) = the difference between money growth and real income growth.
• C) The rate of depreciation of the nominal exchange rate between one nation and another is directly related to the difference in the inflation rates in the nations.
• D) When a nation's real income grows, its inflation rate decreases.

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