If Price Expectations Are Assumed to Be Correct, Money Demand

question 105

Multiple Choice

If price expectations are assumed to be correct, money demand is proportional to income, and net capital flow is infinitely elastic, then the mother of all models in the Appendix to Chapter 14 corresponds to which of the following special cases?

• A) classical closed economy
• B) classical open economy
• C) IS-LM model
• D) Mundell-Fleming model with floating exchange rate

---

Definitions:

CERCLA

The Comprehensive Environmental Response, Compensation, and Liability Act, a U.S. law designed to clean up sites contaminated with hazardous substances.

Hazardous Waste

Waste that poses considerable or potential threats to public health or the environment.

National Contingency Plan

A government strategy designed to handle major emergencies or disasters, especially those affecting the public or the environment.

Chemical Feedstocks

Raw materials used in the manufacture of chemicals, often serving as the base from which other chemicals are derived.