Home » simply true/false question A. The J-curve illustrates the long-term effects of depreciation on the current account .

simply true/false question A. The J-curve illustrates the long-term effects of depreciation on the current account .

simply true/false question

A. The J-curve illustrates the long-term effects of depreciation on the current account.

B. The Marshall-Lerner Condition states that the sum of import and export elasticities must be equal to one in order for depreciation to occur.

C. Under the monetary approach to the exchange rate theory, money supply growth at a constant rate, eventually results in ongoing price level inflation at the same rate, but changes in this long-run inflation rate do not affect the full-employment output level or the long-run relative prices of goods and services.

D. Under PPP (and by the Fisher Effect), A rise in a country’s expected inflation rate will eventually cause a less than proportional rise in the interest rate that depositors of its currency offer to accommodate the rise in expected inflation.

E. An increase in the relative world demand for the Canadian output causes a long-run real appreciation of C$ against Euro.

F. Under the Bretton Woods System, an individual country (other than the United States) with underemployment and excessive current account deficit could achieve both internal balance and external balance only by implementing expansionary fiscal policy.

G. Under a fixed exchange rate system, Home economy is forced to import Foreign inflation.

H. In a two-large-country world with flexible exchange rates, a permanent monetary expansion by Home increases output of both Home and Foreign in the short run.

I. Home output falls more under a floating rate than under a fixed rate in response to an adverse temporary export demand shock.

J. An economy is more vulnerable to the instability in the domestic money market under a fixed rate than under a floating rate.

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