Question $6$

$1$ pts

How would you best explain the monetary approach to the exchange rate? Select one $-$ the most appropriate answer.

Price level is defined by money demand and money supply.

Exchange rate is determined by relative money demand and relative money supply.

It implies that purchasing power parity holds.

Interest rate does not affect price level directly.

All answers are correct.

No correct answer.

Output influences price level through its impact on relative money demand.