Suppose that better transaction technologies are developed that reduce the domestic demand for money. Use the monetary

Question:

Suppose that better transaction technologies are developed that reduce the domestic demand for money. Use the monetary small open-economy model to answer the following:
(a) Suppose that the is flexible. What are the equilibrium effects on the price level and the
(b) Suppose that the is flexible, and the domestic monetary authority acts to stabilize the price level. Determine how the domestic money supply changes and the effect on the nominal Suppose that the is fixed. Determine the effects on the and the price level, and determine the differences from your results in parts (a) and (b).

Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...