Review_Questions_Chapters_14_%26_15 - ECMC61 International...

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ECMC61 – International Economics: Finance Chapter 14 Question 1: Chapter 14, Problems #4. What is the short run effect on the exchange rate of an increase in domestic real GNP, given expectations about future exchange rates? Question 2: Chapter 14, Problems #10. In our discussion of short run exchange rate overshooting, we assumed that real output was given. Assume instead that an increase in the money supply raises real output in the short run (An assumption that will be justified in Ch16). How does this affect the extent to which the exchange rate overshoots when the money supply first increases? Is it likely that the exchange rate undershoots? (Hint: In figure 14-12a (page 361), allow the aggregate real money demand schedule to shift in response to the increase in output.) Question 3: Compare to a temporary increase in real money demand, there will be a larger
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This note was uploaded on 02/05/2011 for the course ECM 61 taught by Professor Jackparkinson during the Summer '10 term at University of Toronto.

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Review_Questions_Chapters_14_%26_15 - ECMC61 International...

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