state the equation of exchange rate of the monetary approach to the exchange rate

Expert Solution

Answer:
Equation of exchange rate for the monetary approach to the exchange rate is given below

Exchange rate of dollar(us) to Euro(eur) is given by below equation

ratio of Price Relative nominal money supply
level divided by real money demand,

So, ration of price level = Relative nominal money supply / real money demand
From above equation we can say equation of exchange addresses the relationship between money and price level and between money and nominal GDP. It also shows how demand changes the whole equationas well.

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Rahul Sunny answered 1 year ago

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