Question
Which of the following statements is TRUE? (I) In the sticky-price monetary model, the short-run depreciation of the domestic currency is larger than its long-run
Which of the following statements is TRUE? (I) In the sticky-price monetary model, the short-run depreciation of the domestic currency is larger than its long-run depreciation when an unanticipated permanent increase in the domestic money supply occurs. (II) In the sticky-price monetary model, a fall in domestic money supply causes a long-run appreciation of the domestic currency which is larger than the short-run appreciation. (III) Sticky-price monetary model assumes that the purchasing power parity does not hold. (IV) Both flexible-price and sticky-price monetary models assume that the purchasing power parity holds in the long run.
(I) and (III) only
(I) and (II) only
(I) and (IV) only
(II) and (IV) only
(II) and (III) only
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