Notesale: Turn your study into money

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Assignment Finance
Abstract: This assignment consists of 6 different Finance topics
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Later on this assignment analyzed the monthly (end-of
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After that, using Uncovered Interest Parity Condition (UIP)
we calculated the 10 years ahead expected exchange rate
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In the last part it is discussed how the Federal Reserve may achieve a depreciation of the
US dollars against the foreign currency when the US policy rates and the foreign
economy reached the zero-lower bond (ZLB)
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Figure 1
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S
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The values that determine the
supply of money in the money market are the nominal money supply (MS)
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While the values that determine the demand for money include the national income (Y) or
in other words the GDP, and the short-term interest rate (R)
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On the left side of Figure 1 is presented the Forex Market
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In Figure
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The intersection of the
money demand curve with the money supply curve in money market gives the equilibrium
interest rate, which due to UIP ( Uncovered Interest Parity) it goes to the FR curve (expected
return on the foreign deposits) and figure out what the exchange rate should be in the
equilibrium
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As the US experienced a recession it means that the inflation rate will experience a decrease
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The decrease in the domestic interest rate will depreciate the US
currency against the NOK one, all else equal
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(ii) an increase in the real money supply in the foreign economy?

If Central Banks increase the real money supply, it means that they imply lower interest rates
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The decrease in interest rate will cause the exchange rates to increase, as well as the
real money supply line to shift to the right (see Figure 2)
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As it is shown in Figure 2, a decrease in interest rate will
lead to an

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