1. Consider the effect of the money supply change on the price and the expected exchange rate. Initially, Ms = 500, P= 100 and E = 50CH/CF. Then, Home central bank changed the nominal money supply to 550. la. Suppose that the change is only temporary. Answer the price Pand the expected exchange rate E. P: E: 1.b. Suppose that the change is permanent. 1.b.i. Answer the values of P and E in the short-run. Short-run P: E: 1.b.ii. Answer the values of P and E in the long-run. Long-run P: E:

1. Consider the effect of the money supply change on the price and the expected exchange rate. Initially, Ms = 500, P= 100 and E = 50CH/CF. Then, Home central bank changed the nominal money supply to 550. la. Suppose that the change is only temporary. Answer the price Pand the expected exchange rate E. P: E: 1.b. Suppose that the change is permanent. 1.b.i. Answer the values of P and E in the short-run. Short-run P: E: 1.b.ii. Answer the values of P and E in the long-run. Long-run P: E:

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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To explain the determinants of exchange rates in the short run, analysis can be used....a. The law of one priceb. Asset demand theoryc. Quantity theory of moneyd. Liquidity preference theory
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Price Level P a T T T T LAS O Reference. Figure 9-16 I 1 T 1 B Q₁ Q₂ Real Output SAS, SAS, Refer to the graph above. Assume the economy is initially at point B. The graph correctly demonstrates an economy moving to point C if: the government decreases the money supply. O productivity increases by less than the increase in wages. O a country's exchange rate appreciates (gains value). wages rise by less than the increase in productivity. 11
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