4) Use the money market and FX diagrams to answer the following questions. This question considers the relationship between the euro (€) and the U.S. dollar ($). The exchange rate is in U.S. dollars per euro, Es/e. Suppose that with financial innovation in the United States, real money demand in the United States decreases. On all graphs, label the initial equilibrium point A. a. Assume this change in U.S. real money demand is temporary. Using the FX/money market diagrams, illustrate how this change affects the money and FX markets. Label your short-run equilibrium point B and your long-run equilibrium point C. b. Assume this change in U.S. real money demand is permanent. Using a new diagram, illustrate how this change affects the money and FX markets. Label your short-run equilibrium point B and your long-run equilibrium point C. c. Illustrate how each of the following variables changes over time in response to a permanent reduction in real money demand: nominal money supply Mus, price level Pus, real money supply M US/PUS, U.S. interest rate is, and the exchange rate Es/e
4) Use the money market and FX diagrams to answer the following questions. This question considers the relationship between the euro (€) and the U.S. dollar ($). The exchange rate is in U.S. dollars per euro, Es/e. Suppose that with financial innovation in the United States, real money demand in the United States decreases. On all graphs, label the initial equilibrium point A. a. Assume this change in U.S. real money demand is temporary. Using the FX/money market diagrams, illustrate how this change affects the money and FX markets. Label your short-run equilibrium point B and your long-run equilibrium point C. b. Assume this change in U.S. real money demand is permanent. Using a new diagram, illustrate how this change affects the money and FX markets. Label your short-run equilibrium point B and your long-run equilibrium point C. c. Illustrate how each of the following variables changes over time in response to a permanent reduction in real money demand: nominal money supply Mus, price level Pus, real money supply M US/PUS, U.S. interest rate is, and the exchange rate Es/e
Brief Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter13: Open-economy Macroeconomics: Basic Concepts
Section: Chapter Questions
Problem 6PA
Related questions
Question
please help me with question 4
![4) Use the money market and FX diagrams to answer the following questions. This question
considers the relationship between the euro (€) and the U.S. dollar ($). The exchange rate is in
U.S. dollars per euro, Es/e. Suppose that with financial innovation in the United States, real
money demand in the United States decreases. On all graphs, label the initial equilibrium point
A.
a. Assume this change in U.S. real money demand is temporary. Using the FX/money
market diagrams, illustrate how this change affects the money and FX markets. Label
your short-run equilibrium point B and your long-run equilibrium point C.
b. Assume this change in U.S. real money demand is permanent. Using a new diagram,
illustrate how this change affects the money and FX markets. Label your short-run
equilibrium point B and your long-run equilibrium point C.
c. Illustrate how each of the following variables changes over time in response to a
permanent reduction in real money demand: nominal money supply Mus, price level
Pus, real money supply M US/PUS, U.S. interest rate is, and the exchange rate Es/e](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F2fc0ee15-0f91-464a-9c89-ff2e773a521f%2F62aa34e5-a3c1-4d5f-ab7f-33318690c72b%2Fkjghab_processed.png&w=3840&q=75)
Transcribed Image Text:4) Use the money market and FX diagrams to answer the following questions. This question
considers the relationship between the euro (€) and the U.S. dollar ($). The exchange rate is in
U.S. dollars per euro, Es/e. Suppose that with financial innovation in the United States, real
money demand in the United States decreases. On all graphs, label the initial equilibrium point
A.
a. Assume this change in U.S. real money demand is temporary. Using the FX/money
market diagrams, illustrate how this change affects the money and FX markets. Label
your short-run equilibrium point B and your long-run equilibrium point C.
b. Assume this change in U.S. real money demand is permanent. Using a new diagram,
illustrate how this change affects the money and FX markets. Label your short-run
equilibrium point B and your long-run equilibrium point C.
c. Illustrate how each of the following variables changes over time in response to a
permanent reduction in real money demand: nominal money supply Mus, price level
Pus, real money supply M US/PUS, U.S. interest rate is, and the exchange rate Es/e
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