Explain the fundamental equation of the monetary approach, International Economics

Assignment Help:

Q. Present and explain the Fundamental Equation of the Monetary Approach.

Answer: Suppose E$/E = PUS/PE and that domestic price levels depend on domestic money demands and supplies:

PUS = MSUS/L(R$, YUS) PE = MSE/L(RE, YE)

So the exchange rate is completely determined in the long run by the relative supplies of those excise and the relative real demands for them. Alters in interest rates and output levels affect the exchange rate only through their influence on money demand.


Related Discussions:- Explain the fundamental equation of the monetary approach

FDI, WHAT ARE THE METHODS OF FDI

WHAT ARE THE METHODS OF FDI

Reciprocal demand, Illustration of reciprocal demand through example

Illustration of reciprocal demand through example

Lost decade of latin american growth, Q. The 1980s are considered as the "l...

Q. The 1980s are considered as the "lost decade" of Latin American growth. Explain why? Answer: Whilst the Great Depression made it hard for developing countries to make pa

Is europe an optimum currency area, Q. Is Europe an optimum currency ...

Q. Is Europe an optimum currency area? Answer: Yes the area's economy is strongly integrated with its own: most EU members export as of 10 to 20 percent of their output

Why are prices of factors of production not equalized, Q. Why are prices o...

Q. Why are prices of factors of production not equalized? Answer: Again this statement may not or may be argued to be true. On the other hand, the growth and large volume in

Pestel framework, The PESTEL is a strategic development technique that prov...

The PESTEL is a strategic development technique that provides a helpful framework for analyzing the environmental pressures on an organization (Rogers, 1999). PESTEL framew

Show albanias comparative advantage, Q. Now, consider that the relative pr...

Q. Now, consider that the relative price of A is actually not higher than Albania's autarkic level of 1, but quite the opposite (e.g. PA/PB = 0.5). Could Albania still be able t

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd