I got A as .98, B as .94, C as .88 and E as .5 . I Could not figure out d and f if you could help me with that please.

Em , ' - ' >-: ,llw r; m C' G File /Users/colln/Down|oads/N%20ECN%20438%20Extra%20Credit%204.pdf Consider the asset model of exchange rate determination studied in class. The money demand is given by the equation M_' _ E P. ' i. The uncovered interest parity is given by the equation Ea E . + m a 121: E t Suppose that investors form their expectations following the equation Efn = 915: + (1 - 9)Ef where 0 is a parameter, 0 s 6 s 1. (a) In period t = 1, the following information is provided: 9 = 0, P1 = 1, M: = 100, Y, = 4, i; = .02, and E; = E0 = 1. Find 13,. (b) Given part (a), suppose the Central Bank applies a contractionary monetary policy in period t = 2 under static exchange rate expectations: M5 = 50 and 9 is still 0. Find 5;. (c) Given part (a), suppose the Central Bank applies a contractionary monetary policy in period t = 2 under changing exchange rate expectations: M25 = 50 and 9 is now 0.5. Find E2. (d) Compute the magnitude of the undershooting and explain (intuitively and graphically) your result. (a) nd the value that E will take in the new long-run equilibrium. (f) Repeat part (d) if 9 changes from 9 = 0 to 9 = 5. Compute the following sensitivity: d(umlershautiny) d6 Explain the impact from '0 to the magnitude of undershooting. Note: undershooting is calculated as the difference between the exchange rate under dynamic expectations and the exchange rate under static expeditions (given that a change in monetary policy has ocwrred). E} N ECN 438 Exlr....pdf Show All