Fundamental equation to the exchange rate

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Reference no: EM131000878

Fundamental Equation to the Exchange Rate

Using the fundamental equations from the general monetary approach, describe how each of the following will affect the home and foreign price level, real money balances, and the exchange rate, E_H/F in the long run. Also, state whether the home currency appreciates or depreciates for each.

a A permanent increase in home money supply.

b A permanent increase in the foreign money supply.

c An increase in home real income level.

Reference no: EM131000878

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