Question: Suppose there is a decrease in real money demand [L(R,Y)] in the U.S and a decrease in nominal money supply (M*) in Europe. Using the

Suppose there is a decrease in real money demand [L(R,Y)] in the U.S and a decrease in nominal money supply (M*) in Europe. Using the short-run model of exchange rate determination, illustrate and explain what happens to the E$/ exchange rate in the short run.

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