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Which of the Following Is Likely to Be True of the Nominal

Question 127

Multiple Choice

Which of the following is likely to be true of the nominal and the real exchange rates in the short run and in the long run if prices in two countries do not respond to exchange rate changes?


A) The real and the nominal exchange rates between the currencies move proportionally in both the short run and the long run.
B) The real and the nominal exchange rates between the currencies move proportionally in the short run but not in the long run.
C) The real and the nominal exchange rates between the currencies move proportionally in the long run but not in the short run.
D) The real and the nominal exchange rates between the currencies remain constant over time.

Correct Answer:

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