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31. The new LR exchange rate E_(#/€) after the policy change: O1) (a) 0.25 O 2) (b) 0.5 O 3) (c) 1 O4) (d) 1.5 O 5) (e) none of (a)-(d) are even close

31. The new LR exchange rate E_(#/€) after the policy change: O1) (a) 0.25 O 2) (b) 0.5 O 3) (c) 1 O4) (d) 1.5 O 5) (e) none of (a)-(d) are even close

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
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29. [Q29-Q33] Given the situation below, use the "complete SR+LR" model to examine how the exchange rate E_(W/E) moves over time. • prices are fixed in the SR and fully flexible in the LR. • both UIP and CIP hold. • real income is constant: YkOR = YEU = 500 • the world real interest rate r* is 0.5 • Given the money market situation described below, Korea (=home) and the Eurozone(=abroad) have been in the initial LR eq'm: Mk = Màu = 1000 %3D MR %3D %D LEU EUYU • At moment T, there is a one-time permanent increase in the home nominal money supply (i.e, Mặ 1 M = 2000) Home Money Supply %3D 2000 MK 1000 Time 31. The new LR exchange rate E_(#/€) after the policy change: O 1) (a) 0.25 O 2) (b) 0.5 3) (c) 1 O 4) (d) 1.5 O 5) (e) none of (a)-(d) are even close
Transcribed Image Text:29. [Q29-Q33] Given the situation below, use the "complete SR+LR" model to examine how the exchange rate E_(W/E) moves over time. • prices are fixed in the SR and fully flexible in the LR. • both UIP and CIP hold. • real income is constant: YkOR = YEU = 500 • the world real interest rate r* is 0.5 • Given the money market situation described below, Korea (=home) and the Eurozone(=abroad) have been in the initial LR eq'm: Mk = Màu = 1000 %3D MR %3D %D LEU EUYU • At moment T, there is a one-time permanent increase in the home nominal money supply (i.e, Mặ 1 M = 2000) Home Money Supply %3D 2000 MK 1000 Time 31. The new LR exchange rate E_(#/€) after the policy change: O 1) (a) 0.25 O 2) (b) 0.5 3) (c) 1 O 4) (d) 1.5 O 5) (e) none of (a)-(d) are even close
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