Question

1 Suppose that in a country the real demand for liquidity is L(RY)-2Y/100R·Assume that the 、 interest rate in the foreign country is 24%(R*-0.24),the domestic income is $1000 billion and the domestic price level is P-1.2.As a central banker,you want to keep the nominal exchange rate fixed at E= 1.5. (1):What should be the domestic interest rate?(Answer with a number instead of a percentage) (2):What should the nominal money supply be(in billions)? (3):If the money supply in the foreign country increases, in order to keep the exchange rate fixed the domestic central bank must(choose.. supply.Moreover,if the domestic aggregate income decreases,the domestic central bank must(choose... increase/decrease)the domestic money supply (4):Therefore,in a fixed exchange rate regime,the central bank(choose... can/can't)have the ability to conduct an active monetary policy (increase/decrease)the domestic money

Answer 1

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