How can long run values in the real exchange rate change? What ...

[nelaaney]

How can long run values in the real exchange rate change?
 
  What will be an ideal response?

Question 2

Which of the following statements is true?
 
  A) Eurobanks are able to create money.
  B) Eurobanks accept deposits but not loans.
  C) Eurobanks are essentially intermediaries.
  D) Both A and C.

[Laurenleakan]

Answer to Question 1

An increase in world relative demand for U.S. output causes a long-run real appreciation of the dollar against the euro (a fall in real dollar/euro exchange rate).
A relative expansion of U.S. output causes a long-run real depreciation of the dollar against the euro (a rise in real dollar/euro exchange rate).

Answer to Question 2

C