Which of the following statements is the most accurate?
A) In the long run, national price levels play a minor role in determining both interest rates and the relative prices at which countries' products are traded.
B) In the long run, national price levels play a key role only in determining interest rates.
C) In the long run, national price levels play a key role only in determining the relative prices at which countries' products are traded.
D) In the long run, national price levels play a key role in determining both interest rates and the relative prices at which countries' products are traded.
E) In the long run, national price levels play no role in determining interest rates and the relative prices at which countries' products are traded.

Question

Quizplus · Accepted Answer

In the long run, national price levels play a key role in determining both interest rates and the relative prices at which countries' products are traded. This is because in the long run, inflation rates and currency exchange rates are both affected by national price levels, which in turn affect interest rates and the relative prices of products in international trade. Therefore, option D is the most accurate statement. Options A, B, and C are incorrect as they either underestimate or overestimate the role of national price levels in determining interest rates and relative prices. Option E is also incorrect as national price levels do indeed have an impact on these economic factors.

Which of the Following Statements Is the Most Accurate