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2. Initially Home economy was in the long-run equilibrium. Then, Home central bank permanently decreased nominal money supply. 2.a. Consider the short-run effect of the

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2. Initially Home economy was in the long-run equilibrium. Then, Home central bank permanently decreased nominal money supply. 2.a. Consider the short-run effect of the permanent decrease. In the gure of the FX market model, how would Home rate of return curve and the Foreign rate of return curve shift in the short-run: Leftward, Rightward, or No shift? Home rate of return curve: Foreign rate of return curve: 2.b. Consider the long-run effect of the permanent decrease. In the figure of the FX market model, how would the Home rate of return curve and the Foreign rate of return curve shift in the long-run: Leftward, Rightward, or No shift? Home rate of return curve: Foreign rate of return curve

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