Question

The introduction of automatic teller machines, which reduces the demand for money, will, according to the...

  1. The introduction of automatic teller machines, which reduces the demand for money, will, according to the Mundell–Fleming model with floating exchange rates, lead to a rise in both income and net exports.

    True

    False

  2. If the Fed announces that it will fix the exchange rate at 100 yen per dollar, but with the current money supply the equilibrium exchange rate is 150 yen per dollar, then the money supply must be increased to maintain the Fed's announcement.

    True

    False

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Answer #1

True...

(The introduction of automatic teller machines, which reduces the demand for money, will, according to the Mundell–Fleming model with floating exchange rates, lead to a rise in both income and net exports)...

True..

(As earlier exchange rate 150 yen per dollar and reduce to 100 yen per dollar so, the money supply have to be increased to maintain this commitment)..

(Please give an up vote if you find it helpful)...

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