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ECO -Between 1984 and 1985 the money supply in the United States

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Question;Between 1984 and 1985 the money supply in the United States increased from $570 billion to $641 billion while the consumer price index rose from 96.6 to 100. During the same time period the money supply in Brazil rose from 24.4 billion cruzados to 106.1 billion cruzados while the consumer price index rose from 31 to 100. How do these numbers match up with the predictions of the asset approach to foreign exchange? Give reasons for your answer. What should be the predicted short run and long run impact on the dollar for cruzado exchange rate during this time period.

 

Paper#57608 | Written in 18-Jul-2015

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