Problem Set 70-1

1. Use a AA-DD model (not necessarily the diagram) to explain the sequential short-run adjustment process of an increase in the money supply on the following economic variables under floating exchange rates.

A. the interest rate
B. the nominal exchange rate
C. the real exchange rate
D. the current account balance
F. disposable income
G. consumption
H. saving
I. investment

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Last Updated on 2/18/05