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The country has trade relations with the ABC country which only produces wine. The currency of country ABC is the qwerty, QWE. The real exchange
The country has trade relations with the ABC country which only produces wine. The currency of country ABC is the qwerty, QWE. The real exchange rate, e, is equal to five liters of wine per ton of cheese. The ABC country price level is 50 qwerty per liter of wine. The country's money supply is 45 xpto. With this information, read the statements. I) The fundamental value of the (nominal) exchange rate is equal to 2.5 qwerty/xpto. II) Suppose the country wants a money supply level that equals the fundamental value of the exchange rate and the fixed rate of QWE 2.5/XP. The domestic money supply level achieves this target is equal to 22.5.
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