Answer the question according to the graph below.Dollar/euro exchangerate, EseEseDollar returnDollar returnEe2'EeExpectedeuro returnExpectedeuro return3'1'EdeRates ofreturn (indollar terms)RR RL(Rg. Yus)L(Rg. Yus)MusPisU.S. real4money supplyMusPus2.U.S. realU.S. realmoney holdingsmoney holdingsAssume that the U.S. money supply is initially given at M'us, the price level is initially given atP'us, and the equilibrium exchange rate is initially at E's/e.A permanent increase in the nominal money supply from Mus to M²us in the long-run willresult in a new equilibrium at pointLütfen birini seçin:O A. 4'O B. 1'O C. 2'O D. 3'

The money supply is the total amount of money available in the economy. The money supply is…

Dollar/euro exchange rate, Ese Ege Dollar return Dollar return 2' - Ege 2' 4' Expected euro return Ee Expected euro return 3' Ede Rates of return (in dollar terms) R L(Rg. Yus) L(Rg. Yus) Mis PUs Pis U.S. real 4. money supply Mus Pus Mis 2 US U.S. real money holdings U.S. real money holdings Assume that the U.S. money supply is initially given at M'us, the price level is initially given at P'us, and the equilibrium exchange rate is initially at E's/e. A permanent increase in the nominal money supply from M-us to M²us in the long-run will result in a new equilibrium at point Lütfen birini seçin: O A. 4' O B. 1' O C.2' O D. 3'

Dollar/euro exchange rate, Ese Ege Dollar return Dollar return 2' - Ege 2' 4' Expected euro return Ee Expected euro return 3' Ede Rates of return (in dollar terms) R L(Rg. Yus) L(Rg. Yus) Mis PUs Pis U.S. real 4. money supply Mus Pus Mis 2 US U.S. real money holdings U.S. real money holdings Assume that the U.S. money supply is initially given at M'us, the price level is initially given at P'us, and the equilibrium exchange rate is initially at E's/e. A permanent increase in the nominal money supply from M-us to M²us in the long-run will result in a new equilibrium at point Lütfen birini seçin: O A. 4' O B. 1' O C.2' O D. 3'

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Part A its a long question. in your own words
Dollar/euro exchange rate, Ese Eye Return on dollar deposits Expected return on euro deposits Rates of return (in dollar terms) R₂ L(Rg. Yus) U.S. real money supply U.S. real money holdings Both asset markets are in equilibrium at the interest rate R¹ and exchange rate E¹; at these values, money supply equals money demand (point 1), and the interest parity condition holds (point 1'). What are the short run and long run effects of a permanent increase in U.S. money supply? Assume that the U.S. real national income is constant. Foreign exchange market Money market Mus Pus (increasing) ↓
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Sub : FinancePls answer very fast.I ll upvote. Thank You