1. mid exam answers 1.We assume that a permanent increase in the growth rate of the U.S. money supply is from  to  +  . The Fed unexpectedly announces at time t 0.We assume that  *=0. The long-run time paths of U.S. economic variables as shown as right. Please answer the questions: (1)Please use the Fisher-effect theory to explain why R $ 1 rises to R $ 2.

2. (2)Please use the money market equilibrium to explain why P US jumps at time t 0. (3)Please use the PPP theory to explain why E jumps at time t 0.

4. Ans ： (1)Fed 宣布將永久性提高貨幣供給成長率為  +   ，因此人們預期在達到貨幣市場 均衡之下，未１來的通貨膨脹率將上 漲為  +   ＝  e 。根據 Fisher effect ： R $ 1 上升至 R $ 2 (2)money market equilibrium R $  P US

5. (3)PPP 定理 P US E $/€ 2. A country imposes a tariff on imports from abroad. How does its action change the long-run real and nominal exchange rate between home and foreign currency? Ans ：本國對進口財課徵關稅，使得進口財 價格上漲，本國人民因而減少對進口

6. 財的需求, 增加對本國商品的需求, 使 得本國商品相對價格上漲 3.The economy is full-employed at the initial time. Prices are fixed in the short run. We

7. assume that suddenly there is a temporary shift in consumers tastes away from domestic products. Please explain the changes of output market, money market and foreign exchange market to describe the changes of E, Y in the DD-AA model. What is the effect of expansionary fiscal policy that the government adopts to maintain full employment?

8. Ans ： (1) 本國消費者暫時性較不偏好本國商品 產出市場： (DD 線左移 ) 貨幣市場： 外匯市場： 賣本國幣, 買外幣 (2) 若政府採取擴張性財政政策以回復充分 就業, 其效果為： 最後, E 不變

10. 4.Please use the DD-AA model to describe the effects of an increase in domestic money supply. (Please describe the changes of different schedules) Ans ：