According to the classical model,an increase in the Canadian nominal money supply would cause the nominal exchange rate to ________ and the real exchange rate to ________.
A)depreciate;appreciate
B)appreciate;depreciate
C)depreciate;not change
D)appreciate;not change

Question

Quizplus · Accepted Answer

In the classical model, an increase in the nominal money supply leads to a depreciation of the nominal exchange rate due to higher inflation expectations. However, the real exchange rate remains unchanged because it is determined by real factors, not nominal variables.

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