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Use the money market and FX diagrams to answer the following questions about the relationship between the British pound () and the U.S. dollar ($). The exchange rate is in U.S. dollars per British pound, (Es). c. Using your diagram from a, state how each variable changes relative to its initial value at point A in the long run. Compared to their values before the initial increase in the money supplyat point A on the graphsthe U.S. interest rate (ius) will be the British interest rate will be the dollar per pound 2 exchange rate (Es) will be the expected dollar per pound exchange rate (E) will be and the U.S. price level will be 2 Use the money market and FX diagrams to answer the following questions about the relationship between the British pound () and the U.S. dollar ($). The exchange rate is in U.S. dollars per British pound, (Es). c. Using your diagram from a, state how each variable changes relative to its initial value at point A in the long run. Compared to their values before the initial increase in the money supplyat point A on the graphsthe U.S. interest rate (ius) will be the British interest rate will be the dollar per pound 2 exchange rate (Es) will be the expected dollar per pound exchange rate (E) will be and the U.S. price level will be 2

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