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Consider the simultaneous equilibrium in the US money market and the foreign Exchange rate O exchange market. In this problem we will analyze the effect
Consider the simultaneous equilibrium in the US money market and the foreign Exchange rate O exchange market. In this problem we will analyze the effect of a decline in the future expected exchange rate (expected (Es/( ) ), i.e. expected dollar Dollar return appreciation. The figure on the right shows the return on dollar deposits as a function of the dollar/euro exchange rate (Es/ e) 1) Using the 3-point drawing tool, draw the line representing the dollar return on euro deposits. Label this line 'RET-(" 2) Using the 3-point drawing tool, draw a new line on the same graph representing the dollar return on euro deposits as the future expected exchange rate falls, and label it 'RET-(2. Carefully follow the instructions above and only draw the required objects. Rates of return
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