Please write out and explain what causes exchange-rate changes
in short run using the asset approach...
Please write out and explain what causes exchange-rate changes
in short run using the asset approach to exchange-rate
determination. (Hint: Make sure that you provide both graphical and
verbal explanation in your answer.}
Briefly discuss what causes short run and long run changes in
exchange rates. Be sure to include key terms such as asset market
approach to exchange rates, purchasing power parity, and the
monetary approach to exchange rates.
2. This problem evaluates the short-run asset approach to
exchange rates. Assume the foreign price level P* is equal to 1,
there is no inflation in either country, and r* is equal to 0.04 or
4%. Nominal money demand, MD, is given by L(i)PY.
?(?)=1−0.5? Y = 20 M=19.6
Hence the economy is at an initial equilibrium summarized by P =
1 and E = 1.
A. The central bank decides to stimulate the economy with a
one-time permanent...
Distinguish between the nominal exchange rate and the real exchange
rate . Explain the various short-run and long-run factors that
affect the exchange rate of a country . Why exchange rate is
volatile.
Explain the monetary approach to exchange rate determination
using the equations that
characterize this approach, stating its general prediction. What
are its specific predictions
about the long-run effects on the exchange rate of changes in money
supplies, interest rates,
and output levels?
Use the short-run asset approach to predict the effect of a
temporary increase in money supply in the U.S. on expected future
exchange rate of dollar against euro and spot exchange rate of
dollar against euro.
What are a fixed exchange rate and a floating exchange rate?
Please explain in eextensive detail and provide and example for
both detail. So I may understand thoroughly.