A permanent change in monetary policy More precisely, suppose that the domestic money supply increases permanently (a) Using the real exchange rate model explain the long-run consequences of this...

A permanent change in monetary policy More precisely, suppose that the domestic money supply increases permanently

1. (a) Using the real exchange rate model explain the long-run consequences of this policy change


2. (b) Using the short-run model, and using the result from (a), explain the short-run consequences of this change policy change


3. (c) Explain the adjustment between short-run and long-run equilibrium and show this adjustment graphically