Present and explain the Fundamental Equation of the Monetary Approach
What will be an ideal response?
Assume = PUS/PE and that domestic price levels depend on domestic money demands and supplies:
PUS = MUSS/L(R$, YUS)
PE = MES/L( , YE)
Therefore, the exchange rate is fully determined in the long run by the relative supplies of those monies and the relative real demands for them. Shifts in interest rates and output levels affect the exchange rate only through their influence on money demand.
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If someone buries money in a tin can beneath a tree, the money is functioning as a
A) medium of exchange. B) unit of account. C) means of payment. D) store of value. E) bartering tool.
People base their labor supply on the ________ because they care about ________
A) real wage; what their earnings will buy B) real wage; the equality of money wages and the price level C) money wage; a surplus of labor D) money wage; the amount of labor firms demand