Explain how permanent shifts in national real money demand functions affect real and nominal exchange rates in the long run.
The exact change in real money demand does not recognize the
long-term real exchange
Since this being a monetary component. It does not even notice the nominal interest rate
Long term R is determined by the actual interest rate and the rate of entry (growth rate)
Price, which is O X D)
. As a result, long-run price levels will be reduced to keep
Accordingly o EUS=EU = QUS=EU PUS= PEU The long-term price level will make PUS nominally
The exchange rate was reduced. Therefore, due to the demand for real money, the actual exchange will occur
Unchanged and nominal appreciation rates.
Get Answers For Free
Most questions answered within 1 hours.