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Rise in the expected inflation

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Taking into account the monetary approach, and the effect of money supply growth on inflation rate explain the following arguments in detail:

a) When a change in country's nominal interest rate is caused by a decrease in the domestic money supply, the domestic currency appreciates;

b) When the change is caused by a rise in the expected inflation, the currency depreciates.

Explain your answer in detail, talk about the real interest rates and discuss what time horizons you are using in explaining your answer for each par

Reference no: EM131415643

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