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Use the Money Demand / Money supply diagram along with the FX market diagram to demonstrate both the short run and long run impact of
Use the Money Demand / Money supply diagram along with the FX market diagram to
demonstrate both the short run and long run impact of a permanent money supply increase
by the home country (assume prices are sticky in the short run and output is constant). Label
things carefully and explain what happens to money, prices, interest rates, and the exchange
rate in both the short run and long run. [6
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