Which of the following statements is most accurate?
A) In the money market, an increase in U.S. money supply level leads to a proportional increase in the long-run nominal dollar/euro exchange rate.
B) In the money market, an increase in European money supply level leads to a proportional increase in the long-run nominal dollar/euro exchange rate.
C) In the money market, an increase in U.S. money supply growth rate leads to a decrease in the long-run nominal dollar/euro exchange rate.
D) In the money market, an increase in European money supply growth leads to an increase in the long-run nominal dollar/euro exchange rate.
E) In the money market, an increase in U.S. money supply level leads to a proportional decrease in the long-run nominal dollar/euro exchange rate.

Question

Quizplus · Accepted Answer

An increase in the U.S. money supply level leads to a decrease in the value of the dollar, which in turn leads to an increase in the nominal dollar/euro exchange rate.

Which of the Following Statements Is Most Accurate