ECON3372 | Accounting in Economics - Boston university

13) Under purchasing power parity (i.e. in the long-run), if U.S. monetary growth leads to a long run doubling of the U.S. price level, while Germany's price level remains constant, PPP predicts that the USD/DM exchange rate (dollars per 1 DM): A) will double in the long-run B) will be halved in the long-run C) will remain the same in the long-run, but double in the short-run D) will be halved in the short-run. E) will not change in the long-run 14) The aggregate real money demand schedule L(R,Y) A) slopes upward because a fall in the interest rate raises the desired real money holdings of each household and firm in the economy. B) slopes downward because a fall in the interest rate reduces the desired real money holdings of each household and firm in the economy. C) has a zero slope because a fall in the interest rate keeps constant the desired real money holdings of each household and firm in the economy. D) has a slope that cannot be determined E) slopes downward because a rise in the interest rate makes consumers less attracted to the liquidity of money.