Macroeconomics
13th Edition
ISBN: 9780134744452
Author: PARKIN, Michael
Publisher: Pearson,
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Chapter 15.1, Problem 2RQ
To determine
Identify the market situation for Country U to export goods and services.
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This question examines the relationship between the Indian rupee (Rs) and the US dollar ($). We
denote the exchange rate in rupees per dollar as ERS/$. Suppose the Bank of India permanently
decreases its money supply by 4%.
1. First, consider the effect in the long run. Using the following equation, explain how the change
in India's money supply affects the Indian price level, PIN, and the exchange rate, ERS/$:
AERS/STIN
ERS/$
-
·TUS = (MIN - 9IN) - (Mus - gus).
MIN
2. How does the decrease in India's money supply affect the real money supply,
in the long
PIN
run.
3. Based on your previous answer, how does the decrease in the Indian money supply affect the
nominal interest rate, UN, in the long run? (hint: M = L(i)Y hold in the long run)
4. Illustrate the graphs to show how a permanent decrease in India's money supply affects India's
money and FX markets in the long run. (hint: you may refer to the figures on lecture slides #5,
titled "Analysis in the long run.")
5. Illustrate the…
Please explain the concept/what this fill in graph, thanks
Chapter 15 Solutions
Macroeconomics
Ch. 15.1 - Prob. 1RQCh. 15.1 - Prob. 2RQCh. 15.2 - Prob. 1RQCh. 15.2 - Prob. 2RQCh. 15.2 - Prob. 3RQCh. 15.3 - Prob. 1RQCh. 15.3 - Prob. 2RQCh. 15.3 - Prob. 3RQCh. 15.3 - Prob. 4RQCh. 15.3 - Prob. 5RQ
Ch. 15.4 - Prob. 1RQCh. 15.4 - Prob. 2RQCh. 15.4 - Prob. 3RQCh. 15.4 - Prob. 4RQCh. 15.4 - Prob. 5RQCh. 15 - Prob. 1SPACh. 15 - Prob. 2SPACh. 15 - Prob. 3SPACh. 15 - Prob. 4SPACh. 15 - Prob. 5SPACh. 15 - Prob. 6SPACh. 15 - Prob. 7SPACh. 15 - Prob. 8SPACh. 15 - Prob. 9SPACh. 15 - Prob. 10SPACh. 15 - Prob. 11SPACh. 15 - Prob. 12APACh. 15 - Prob. 13APACh. 15 - Prob. 14APACh. 15 - Prob. 15APACh. 15 - Prob. 16APACh. 15 - Prob. 17APACh. 15 - Prob. 18APACh. 15 - Prob. 19APACh. 15 - Prob. 20APACh. 15 - Prob. 21APACh. 15 - Prob. 22APACh. 15 - Prob. 23APACh. 15 - Prob. 24APACh. 15 - Prob. 25APACh. 15 - Prob. 26APACh. 15 - Prob. 27APACh. 15 - Prob. 28APA
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