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In: Economics

Suppose that the liquidity preferences for the home country h and foreign country f are both...

Suppose that the liquidity preferences for the home country h and foreign country f are both fixed (i.e. they are not a function of the interest rate, i.e. you can ignore the interest rate in this question). The real GDP growth rates of countries h and f are both 0. The nominal money supply growth rate of the foreign country f is also 0. The nominal money supply growth of the home country h is initially 3%, until time T, at which point nominal money supply growth ceases (i.e. it drops to 0%). Draw long-run time series graphs of nominal money M, real money M/P, prices P, and the exchange rate Eh/f, clearly labelling time T on each graph and labelling all axes. (Your complete answer is four time series graphs.)

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Rahul Sunny answered 1 year ago
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