(10PTS) ASSUME STICKY PRICES AND GIVEN EXPECTATIONS OF FUTURE EXCH...

23. (10pts) Assume sticky prices and given expectations of future exchange rates, what is the immediate effect on the exchange rate of the U.S. dollar (purchasing euros) if there is a temporary increase in the quantity of U.S. dollars?

U.S. nominal and real returns rates decline while euro rates hold steady, and the U.S. dollar

depreciates against the euro.