Assume an economy with floating exchange rates, price level is
100, exchange rate is 20, money supply is 10 million. Then suddenly
the central bank increases money supply with 100% and keeps money
supply at that (higher) level permanently. Calculate real money
supply (M/P) in the long run, nominal exchange rate in the long run
and expected exchange rate. Describe what happens with nominal
interest rate in the short run and in the long run and describe the
development of the nominal exchange rate from short to long
run.