s6

1 pts Question 6 Suppose that the economy is in its steady state. At time to, there's an unexpected, permanent monetary contraction which decreases money supply from me to my, as the figure below shows. The domestic price level will in the short-run and in the long-run assuming all the assumptions of exchange rate overshooting model holds. m, mo mi mo mi to t o stay unchanged; decrease. increase: stay unchanged. stay unchanged; increase. O decrease: decrease. O increase, decrease