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Please assist with below question: Plot the combined FX-money market diagram with the U.S. as home and the euro area as foreign. Be sure to
Please assist with below question:
Plot the combined FX-money market diagram with the U.S. as home and the euro area as foreign. Be sure to label all axes, and to clearly denote the domestic money supply and money demand, the domestic interest rate, and the expected returns curve on foreign currency.For each of the following monetary shocks, plot the response in the domestic money market as well as the impact on the nominal spot exchange rate (E$/).
- Temporary domestic monetary stimulus.
- Temporary domestic monetary contraction.
- Permanent domestic monetary stimulus.
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