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In our discussion of short-run exchange rate overshooting, we assumed real output (Y) was constant. Assume instead that an increase in the money supply raises real output in the short run (an assumption that will be justified in a few lectures). How does this a↵ect the extent to which the exchange rate overshoots when the money supply first increases? Is it likely that the exchange rate undershoots? (Hint: In the money market equilibrium, allow aggregate real money demand schedule to shift in response to the increase in output).
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Why did president Obama want to repeal the Bush era tax cuts on upper income tax payers How would the repeal of these tax cuts impact aggregate demand and to what degree How did the economic conditions in 2010 make such a repeal less likely to tak..
A country has had a steady value for its floating exchange rate (stated inversely as the domestic currency price of foreign currency) for a number of years. The country now tightens up on (reduces) its money supply dramatically.
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