You have been appointed policy advisor of the country Economia. The country is an open economy, has a floating exchange
Posted: Wed Mar 09, 2022 8:29 am
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 (πΈπΈπππ/πΉ), 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)
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 (πΈπΈπππ/πΉ), 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)