The behaviour of households and firms in an open economy is represented by the following equations: Desired consumption : Cd = 350 +0.5Y 200r Desired investment: Id = 250 300r Net exports : NX = 0.05YF 0.18 0.5e Real money demand : Md Y 4000(r + TC) P where expected inflation is a = 0 and YF = 2000 denotes the income of foreign households. Government purchases are G=95 and the supply of money by M=480. Assume that international interest parity holds and that the economy is initially in a general equilibrium with a real exchange rate, e=90 and output Y=1200. Questions 9 to 18 relate to this information. Question 15 (4 points) To what level must the money supply be adjusted in the short run in order to maintain the fixed exchange rate? M* = 485 M* 450 M* = 500 M* = 465 The behaviour of households and firms in an open economy is represented by the following equations: Desired consumption : Cd = 350 +0.5Y 200r Desired investment: Id = 250 300r Net exports : NX = 0.05YF 0.18 0.5e Real money demand : Md Y 4000(r + TC) P where expected inflation is a = 0 and YF = 2000 denotes the income of foreign households. Government purchases are G=95 and the supply of money by M=480. Assume that international interest parity holds and that the economy is initially in a general equilibrium with a real exchange rate, e=90 and output Y=1200. Questions 9 to 18 relate to this information. Question 15 (4 points) To what level must the money supply be adjusted in the short run in order to maintain the fixed exchange rate? M* = 485 M* 450 M* = 500 M* = 465