Which one of the following statements is the most accurate?

Question

Quizplus · Accepted Answer

According to the permanent income hypothesis, a permanent increase in a country's money supply will lead to a long-run increase in the domestic price level. This will result in a decrease in the real exchange rate, causing a long-run depreciation of the currency against foreign currencies. Furthermore, in the short run, the increase in the money supply can lead to inflation expectations which can cause a temporary depreciation of the currency. However, in the long run, the nominal exchange rate will adjust to match the increase in the price level, again resulting in a depreciation of the currency.

Which One of the Following Statements Is the Most Accurate