Consider the following information about the domestic country: ONIVERSITY RB L(R,Y)=2.Y-15000R Y = 1000 M 10000...

 

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Consider the following information about the domestic country: ONIVERSITY RBÓ L(R,Y)=2.Y-15000R Y = 1000 M 10000 P= 20 and the following information for the foreign country: R = 5% O If the expected value for the exchange rate, E is équal to 21, what is the exchange rate we will observe in the FX market, if interest rate parity holds? [3 pts] ORY OR ROST C Assume that the domestic money supply decreases by 25% and the new expected value for the exchange rate is equal to 15. (1) What will be the new equilibrium exchange rate value in the short run, if interest rate parity holds? [3 ptsĮ (ii) What will be the equilibrium exchange rate valué in the medium run, if prices adjusted by only a half to the change in money supply, and interest rate parity holds? [3 pts] (iv) What will be the equilibrium exchange rate value in the long run, when prices are fully adjusted? [3pts] (v) Discuss what you have observed for the changes in the exchange rate from (i) to (i 12 pts] Consider the following information about the domestic country: ONIVERSITY RBÓ L(R,Y)=2.Y-15000R Y = 1000 M 10000 P= 20 and the following information for the foreign country: R = 5% O If the expected value for the exchange rate, E is équal to 21, what is the exchange rate we will observe in the FX market, if interest rate parity holds? [3 pts] ORY OR ROST C Assume that the domestic money supply decreases by 25% and the new expected value for the exchange rate is equal to 15. (1) What will be the new equilibrium exchange rate value in the short run, if interest rate parity holds? [3 ptsĮ (ii) What will be the equilibrium exchange rate valué in the medium run, if prices adjusted by only a half to the change in money supply, and interest rate parity holds? [3 pts] (iv) What will be the equilibrium exchange rate value in the long run, when prices are fully adjusted? [3pts] (v) Discuss what you have observed for the changes in the exchange rate from (i) to (i 12 pts]

Answer rating: 100% (QA)

i Domestic Investment Ms 10000 Investment returns 1000011 11000 Foreign Investment Ms 1000021 Invest... View the full answer