Question: 15.1 : What is the short-run effect on the exchange rate of an increase in domestic real GDP, given expectations about the future exchange rate

15.1: What is the short-run effect on the exchange rate of an increase in domestic real GDP, given

expectations about the future exchange rate (PLEASE DRAW OUT).

15.2: In our discussions of overshooting, we assumed GDP was fixed. Assume instead that an increase in the money supply raises output in the short run (but just in the short run). How does this affect the extent to which the exchange rate overshoots when the money supply increases? Is it likely that the exchange rate undershoots? (PLEASE DRAW OUT)

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