Why does the exchange rate transmission mechanism strengthen the interest rate transmission mechanism?
Answer to relevant QuestionsExplain how the holding of a range of assets in people’s portfolios may help to create a more direct link between changes in money supply and changes in aggregate demand.What would cause (a) a steep ADI curve; (b) a gently sloping ADI curve? Compare the short-run and longrun effects of (i) a temporary adverse supply shock and (ii) a permanent supply reduction under each of (a) and (b).Is it possible for the government to target the money supply over the longer term without targeting the PSNCR?What is the difference between adaptive expectations and rational expectations?What is meant by the ‘steady-state economic growth path’? What determines its slope?
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