Overhooting of the nominal exchange rate

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Overhooting of the Nominal Exchange Rate

Using figures for both the U.S. money market and foreign exchange market in the short run and the long run, show the effects of a permanent increase in the U.S. money supply on the nominal exchange rate between the US dollar and the euro. Assume that the U.S. real national income is constant and that Europe is the foreign economy.

Reference no: EM131000877

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