Using the appropriate monetary model of exchange rate determination answer the following:

(a) In a context of sticky prices both domestically and abroad, a large population growth in the domestic country increases domestic real money demand. What are the implications of this for the nominal exchange rate of the domestic currency? Justify your answer by describing all the economic factors that are affected by this population growth (maximum 200 words)

2 (b) In a context of perfectly flexible prices both domestically and abroad, the foreign nominal money supply grows faster than the domestic one, while foreign income grows slower than domestic income. What are the implications of these developments for the rate of change of the nominal exchange rate of the domestic currency? Justify your answer by describing the economic factors that are affected by these differential rates of growth in the nominal money supply and income (maximum 200 words).

(c) In a context of perfectly flexible prices both domestically and abroad, the foreign stock market is expected to rise faster than the domestic stock market. What are the implications of this development for the rate of change of the nominal exchange rate of the domestic currency? Justify your answer by describing the economic factors that are affected by this difference in stock market expectations (maximum 200 words).