You open up the Wall Street Journal and notice the federal funds rate in the United States
Fantastic news! We've Found the answer you've been seeking!
Question:
(a) From this, you conclude what about changes nominal and real exchange rates between the US dollar and the Great British pound? Be very specific about which currency appreciates, and what happens to E(the nominal exchange rate), include units.
(b) What will happen to NX in each country?
(c)If over the long run, inflation is higher in the US, what will happen to the nominal exchange rate? Does the law of one price hold in this case in the long run?
Related Book For
Money Banking and Financial Markets
ISBN: 978-0078021749
4th edition
Authors: Stephen Cecchetti, Kermit Schoenholtz
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