1. According to the quantity theory of money, an increase in money demand (L) will

	a.	increase GDP
	b.	decrease GDP
	c.	increase the price level
	d.	decrease the price level

2. Which of the following theories is unlikely to hold in the short-run because of the presence of non-traded goods?

	a.	Relative purchasing power parity
	b.	Absolute purchasing power parity
	c.	Triangular arbitrage
	d.	Quantity theory of money

3. If absolute PPP holds, then the nominal U.S.-Mexico exchange rate (E_$/peso) will equal

	a.	the U.S. price level expressed in dollars divided by the Mexican price level expressed in dollars
	b.	the Mexican price level expressed in dollars divided by the U.S. price level expressed in dollars
	c.	the U.S. price level expressed in dollars divided by the Mexican price level expressed in pesos
	d.	the Mexican price level expressed in pesos divided by the U.S. price level expressed in dollars

4. If triangular arbitrage holds and a British pound costs $2 and a Euro costs $3, the a British pound will cost (Eeuros/pound)

	a.	.67 Euros
	b.	1.5 Euros
	c.	6 Euros
	d.	None of the above