INTERNATIONAL FINANCE You have been appointed policy advisor of the country Economia. The country is an open economy, ha

[answerhappygod]

INTERNATIONAL FINANCE
You have been appointed policy advisor of the
country Economia. The country is an open economy, has a
floating exchange rate regime and uses the Econ as its
currency.
1. (20 marks) The government is trying to understand
the effect of the following shocks on the exchange rate (𝐸𝐸𝑐𝑜𝑛/𝐹),
the home and foreign price level and real money balances. Use the
fundamental equation of the monetary approach to advise the
government on the effect of each of these shocks.
a. A decrease in foreign money supply (5 marks)
b. An increase in home real income (5 marks)
c. A decrease in the home nominal interest rate (5 marks) d. A
decrease in the foreign nominal interest rate (5 marks)
with graphs