Short Answer Questions - Chapter 6 1) (34 points) ()(10 pts) Explain how the AA schedule is derived for a fixed level of the real money supply. ( (24 pts) Explain the mechanism by which the following four main factors affect the position of the AA schedule 1. Increase in the domestic money supply 2. Increase in the domestic price level 3. Increase in the expected exchange rate 4. Increase in the foreign interest rate