| Question 27 1 pts Given Pus and Yus O An increase in the European money supply
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| Question 27 1 pts Given Pus and Yus O An increase in the European money supply causes the euro to appreciate against the dollar, but it does not disturb the U.S. money market equilibrium. An increase in the European money supply causes the euro to depreciate against the dollar, and it creates excess demand for dollars in the U.S. money market. O An increase in the European money supply causes the euro to depreciate against the dollar, but it does not disturb the U.S. money market equilibrium. O An increase in the European money supply causes the euro to appreciate against the dollar, and it creates excess demand for dollars in the U.S. money market. O An increase in the European money supply causes the euro to depreciate against the dollar, and disturbing the U.S. money market equilibrium. DQuestion 28 1 pts An economy's long-run equilibrium is O the equilibrium that would occur if prices were perfectly fixed at the full employment point. O the equilibrium that would occur if prices were perfectly flexible and always adjusted immediately to preserve full employment. O the equilibrium that would occur if prices were perfectly fixed to preserve full employment. O the equilibrium that would occur if prices were perfectly flexible. O the equilibrium that would occur if prices were perfectly flexible and always adjusted immediately. DQuestion 29 1 pts A permanent increase in a country's money supply O causes a less than proportional increase in its price level. O leaves its price level constant in long-run equilibrium. O causes a more than proportional increase in its price level. O causes a proportional increase in its price level. O causes an inversely proportional fall in its price levelExplanation / Answer
Q 27
When money supply is increased in European Union, it will bring inflation and so the value of Euro will fall and the price of Euro rises. This implies a depreciation of Euro but that will not affect the money market in the US. Hence An increase in the European money supply causes the euro to depreciate against the dollar, but it does not disturb the U.S. money market equilibrium.
Q 28
Full employment level has perfect wage price flexibility. Hence, the equilibrium that would occur if prices were perfectly flexible and always adjusted immediately to preserve full employment
Q 29
When money supply is increased permanently, over time in the long run prices rise in proportion to the rise in money supply. Hence it causes a proportional increase in price level
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