Question: After a permanent decrease in the money supply, A.the exchange rate undershoots in the long run. B.the exchange rate smoothly depreciates in the short run.

After a permanent decrease in the money supply,

A.the exchange rate undershoots in the long run.

B.the exchange rate smoothly depreciates in the short run.

C.the exchange rate overshoots in the short run.

D.the exchange rate smoothly appreciates in the short run.

E.None of the above is correct.

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