To derive the monetary approach,we need money demand equals to money supply and:
A) leakages equal injections.
B) absolute purchasing power parity to hold.
C) covered interest parity to hold.
D) All of the above are correct.

Question

Quizplus · Accepted Answer

The monetary approach to exchange rates relies on the assumption that absolute purchasing power parity holds, which links the price levels and exchange rates through money supply and demand.

To Derive the Monetary Approach,we Need Money Demand Equals to Money