37) Consider the specification of money demand: M = kPY Suppose the actual money supply is M* which is not equal to M; according to the neutrality principle, the variable that would adjust to achieve equilibrium is:

Answer is:

P

1/(kY)

Answer is:

A: the money supply B: inflation

A: the money supply B: GDP growth

A: inflation B: GDP growth

A: inflation B: the effective exchange rate

Answer is:

that there has been a gain in the country’s competitiveness.

that absolute purchasing power parity has increased.

that it leads to arbitrage resulting in an appreciation of the real exchange rate in the future.

all of the above

Answer is:

the rate of inflation plus the real rate of interest.

the nominal rate of interest, assuming the Fisher Principle holds

the difference between the rate of growth of the money supply and the rate of inflation

the difference between the foreign and domestic inflation rates

Answer is: