Please answer all questions. Note that the answers have to be typed. The
question related to the AA‐DD analysis should contain neatly presented graphs. The
assignment has to be submitted to turnitin. Note that apart from correct answers, the clarity of
exposition, the depth of arguments
and the overall presentation will be assessed.
Question 1 (10 marks)
Using 5 or more references from Google Scholar write a 1000‐words essay “What do we know
about the exchange rate pass‐through?”
Question 2 (10 marks)
Using the AA‐DD framework, analyse the effects of a permanent increase
in the foreign nominal
money supply on the nominal and real exchange rates, domestic output and current account
under the flexible and fixed exchange rates in the short‐run and in the long‐run. Assume that
the domestic economy starts in the long‐run equilibrium with full employment.
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