According to the classical model,an increase in the American nominal money supply would cause the nominal exchange rate to ________ and the real exchange rate to ________.
A)depreciate; appreciate
B)appreciate; depreciate
C)depreciate; remain unchanged
D)appreciate; remain unchanged

Question

Quizplus · Accepted Answer

An increase in the nominal money supply would lead to a depreciation of the nominal exchange rate due to the increased supply of money, making the currency less valuable relative to others. However, the real exchange rate, which adjusts the nominal rate by price levels, would remain unchanged in the classical model, assuming prices adjust proportionately to changes in the money supply.

According to the Classical Model,an Increase in the American Nominal