Hw3-1 - ing graph and offer explanations a an unexpected permanent decrease in the growth rate of the money supply at time t1 b At date t1 there is

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Economics 442 Homework 3 Due: in class on Thursday, March 13 1. Combination of flow and stock approach of spot rate determination: Use the diagram of the stock-flow approach to analyze the impact of the follow- ing shocks on the euro/yen spot exchange rate. Label the shifts of curves sequen- tially and offer an explanation for each shrift and draw the movement of spot rates over time on a separate graph: a. a permanent decrease in the stock demand for Japanese assets b. a permanent increase in the demand for European goods c. a permanent decrease in the stock demand of European assets 2. Flexible-price monetary model of spot rate determination: Discuss the impact of following shocks on price level, spot rate, nominal interest rate, real interest rate and real exchange rate. Draw the movement on the follow-
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Unformatted text preview: ing graph and offer explanations. a. an unexpected permanent decrease in the growth rate of the money supply at time t1 b. At date t1, there is a permanent increase in domestic output and do-mestic and foreign outputs are perfect complements. time M t1 t0 P S i r q time M t1 t0 P S i r q c. At date t0, there is an expected permanent decrease of the money sup-ply at time t1. 3. Sticky-price monetary model of spot rate determination: Discuss the impact of an unexpected permanent decrease in money supply at time t1 on price level, spot rate, nominal interest rate, real interest rate, and real ex-change rate. Draw the movement and offer explanations. t0 t1 time M P S r q i t1 time M P S i r q...
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This homework help was uploaded on 04/12/2008 for the course ECON 442 taught by Professor Chari during the Winter '08 term at University of Michigan.

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Hw3-1 - ing graph and offer explanations a an unexpected permanent decrease in the growth rate of the money supply at time t1 b At date t1 there is

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