Question

Please write out and explain what causes exchange-rate change in
the

simple (or quantity theory of money) version of the fundamental
equation of the

monetary approach to exchange-rate determination.

Answer #1

Ans.

Quantity theory of money says that total spending (in money
terms) is proportional to the quantity of money.

The theory can be explained in terms of Equation, known as the
quantity equation of exchange:

M × V = P × Y

M = the quantity of money,

V = the velocity (the average number of times currency changes
hands),

P =the average price level, and

Y=real output.

It means that over a given period, the amount of money used to
purchase all goods and services in an economy, M × V, is equal to
monetary value of this output, P × Y.

An assumption of quantity theory is that velocity of money is
approximately constant therefore the spending P × Y is
approximately proportional to M.

Please write out and explain what are the connections between
the short-run (asset) approach to exchange rate determination and
the long run
monetary approach to exchange-rate determination. If you prefer,
you may also use graphs.

What is the equation of exchange (quantity theory of money)? How
does it explain changes in employment and the price level? Analyze
figure 16-7 and explain what happens to inflation and employment as
the Fed changes money supply.
What are the pros and cons of the Fed’s credit policy?

Please explain the two versions of Quantity theory of money
Please respond with short sentences
WILL RATE

Please show the model and explain the quantity theory of money
and how changes in the money supply can affect the FX
rate.

1. Recall the classical economists and one of their
favorite theories: the quantity theory of money and monetary
neutrality. The theory is expressed as an equation as follows: M x
V = P x Y. What does V stand for?
a. the value of the domestic currency
b. the velocity of money
c. the virtual reality of the universe
d. the velocity of investment spending in the economy
2. Following up on question 1 above, what does Y represent?
a....

What causes attraction? Please explain three of the following
with regard to nonverbal behavior:
-propinquity effect,
-similarity,
-reciprocal liking,
-physical attractiveness and liking,
-social exchange
-equity theory

If your country is using flexible or floating exchange rate
against USD: Please draw a simple interest parity
relationship for your country. And evaluate the graph and its
potential consequences in economy.
If your country is using a fixed exchange rate regime against
USD: Please explain how interest parity graph looks like? Please
evaluate the policy changes in your country when FED changes its
own monetary policy.
if your country is USA, then your foreign currency is EURO. You
can also...

Please write 2 paragraphs
What is the relationship between PLC and adoption/diffusion
theory? Explain

Please explain why forecasting exchange rate movement is so
difficult by using monetary model.

What is the key endogenous variable in the quantity theory?
Explain the effect on this key variable of the following
changes:
A. The money supply is doubled
B. The velocity of money increases by 10%
C. Real GDP rises by 2%
D. The money supply increases by 3% while real GDP rises by 3%
at the same time

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