Question

Which one of the following statements is the MOST accurate?

(a) A permanent increase in a country’s money supply causes a proportional long-run depreciation of its currency against foreign currencies.

(b) A temporary increase in a country’s money supply causes a proportional long-run depreciation of its currency against foreign currencies.

(c) A permanent increase in a country’s money supply causes a proportional long-run appreciation of its currency against foreign currencies.

(d) A permanent increase in a country’s money supply causes a proportional short-run depreciation of its currency against foreign currencies.

(e) A permanent increase in a country’s money supply causes a proportional short-run appreciation of its currency against foreign currencies.