discuss Appreciation and Depreciation of Currencies
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Discuss the following statement: "When a change in a country's nominal interest rate is caused by a rise in the expected real interest rate, the domestic currency appreciates. When the change is caused by a rise in expected inflation, the currency depreciates." (It may help to refer back to Chapter $15 .)$
Assume that an expansionary monetary policy leads to a decline or depreciation of the U.S. dollar relative to the currencies of America's trading partners in the short run with unemployed resources. Explain the mechanism by which this will produce an economic expansion in the United States. Explain how the trade impact reinforces the impact on domestic investment.
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