1) a) Use the IS/LM model and the FOREX market to illustrate how a decrease in the...
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Question:
1)
a) Use the IS/LM model and the FOREX market to illustrate how a decrease in the U.S. money supply affects its own output and its exchange rate with the EU in the short run.
b) discuss how expected exchange rates change to illustrate the long run effects of a permanent money supply reduction on the exchange rates.
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