Under purchasing power parity (PPP), if U.S. monetary growth ...

[sabina]

Under purchasing power parity (PPP), if U.S. monetary growth leads to a long run doubling of the U.S. price level, while Germany's price level remains constant, PPP predicts that the
 
  A) long-run DM price of the dollar will be doubled.
  B) long-run DM price of the dollar will be halved.
  C) long-run DM price of the dollar will remain the same.
  D) short-run DM price of the dollar will be halved.
  E) short-run DM price of the dollar will be doubled.

Question 2

Federal Reserve Chairman Volcker's policy to fight inflation
 
  A) led to the 1981-1983 recession, but was ultimately successful.
  B) led to the 1981-1983 recession, but did not end high inflation due to beggar-thy-neighbor effects.
  C) was perfectly complemented by Reagan's decrease in fiscal spending.
  D) led to the 1981-1983 recession and foretold the economic downturn in the mid-1990s.
  E) led to an immediate depreciation of the dollar.

[dantucker]

Answer to Question 1

B

Answer to Question 2

A