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1. Consider the integrated model of the FX market and the money market. Suppose that Home central bank changed nominal money supply temporarily. Because of
1. Consider the integrated model of the FX market and the money market. Suppose that Home central bank changed nominal money supply temporarily. Because of the change, Home currency depreciated. Answer how the change in nominal money supply shifted Home rate of return curve and Foreign rate of return curve: Leftward, Rightward, or No shift. Home rate of return curve: Foreign rate of return curve: 5. Suppose that the purchasing power parity holds with E = Sou/CF and PH = 20cH. Answer Foreign price level
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