Business, 18.02.2020 17:52, iamsecond235p318rq
Use the money market and FX diagrams to answer the following questions. This question considers the relationship between the Indian rupees (Rs) and the U. S. dollar ($). The exchange rate is in rupees per dollar, ERs/$ . On all graphs, label the initial equilibrium point. a. Illustrate how a permanent increase in India’s money supply affects the money and FX markets. Label your short-run equilibrium point B and your long-run equilibrium point C. b. By plotting them on a chart with time on the horizontal axis, illustrate how each of the following variables changes over time (for India): nominal money supply MIN , price level PIN, real money supply MIN/PIN , India’s interest rate iRs , and the exchange rate ERs/$.c. Using your previous analysis, state how each of the following variables changes in the short run (increase/decrease/no change): India’s interest rate iRs , ERs/$, ERs/$e, and India’s price level PIN. d. Using your previous analysis, state how each of the following variables changes in the long run (increase/decrease/no change relative to their initial values at point A): India’s interest rate iRs , ERs/$, ERs/$e, and India’s price level PIN. e. Explain how overshooting applies to this situation.
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Use the money market and FX diagrams to answer the following questions. This question considers the...
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