Consider a case were the growth rate of the money supply in…

Consider a case were the growth rate of the money supply in the US is 6.3% per year and the growth rate of the money supply in the UK is 2.2% per year. Real GDP growth in the US is 3% per year while real GDP grows at a rate of 1.5% in the UK. In addition, the pound per dollar exchange rate is depreciating at a rate of 1.8% per year. You should assume that the inflation rate is determined by the quantity theory of the price level (and inflation) with constant velocity in each country. Calculate the annual percentage change of the real exchange rate (RER). Note: Include a (-) sign if the growth rate is negative. Round your answer to the nearest tenth of a percent.

Earlier today, you saw that the federal funds rate in the Un…

Earlier today, you saw that the federal funds rate in the United States is currently 4.5 percent (i.e., at the upper bound of the 4.25-4.5 percent target range). The bank rate in the United Kingdom is also 4.5 percent. The FOMC is meeting on Tuesday and Wednesday of this week and you expect the committee to drop the interest rate target by 0.5 percentage points. Based on this information you expect that ______ Select all that apply.