ECON303 Tutorial 3 - Econ303 International Money and...

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Unformatted text preview: Econ303: International Money and Finance Tutorial 3 1. Explain how permanent shifts in national real money demand affect real and nominal exchange rates in the long run. 2. Other things equal, how would you expect the following shifts to affect a country's real and nominal exchange rates? a. The overall level of spending doesn't change, but domestic residents decide to spend more of their income on nontraded products and less on tradables. b. Foreign residents shift their demand away from their own goods and towards the home country's exports. c. A hurricane destroys 25% of the capital in domestic economy. 3. Read the following article: Hopper, "What Determines the Exchange Rate: Economic Factors or Market Sentiment?" and be prepared for discussion. ...
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