True/False questions. Explain briefly only if your answer is false. (3 points each)

1. In Fisher’s two-period consumption model, an increase in the interest rate always increases the second-
period consumption if a consumer is a net saver.

2. In the long run, according to the quantity theory, monetary policy tightening decreases the nominal
interest rate.
3. Under the PPP, the real exchange rate should always be one.
4. Monetary policy is often preferred over fiscal policy due to its faster implementation lags.
5. Unexpected inflation redistributes purchasing power arbitrarily.
6. A decline in the unemployment rate is not necessarily a good signal of labor markets.
7. Since APC tends to decrease as income rises, consumption grows slower than income over time.
8. Regardless of the channel, the appreciation of the domestic currency always decreases GDP.
9. The Mexican Peso crisis forced the Mexican government to abandon the floating exchange rate regime.
10. In the long run, high inflation reduces real wages.

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