The difference between the simple monetary model and the general monetary model of exchange rate determination in the long run is that:

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The short-term effects of changing to a more expansionary monetary policy often include increased output and employment, but if the fast monetary expansion continues in the long-term, inflation will result.

A monetary rule is a tried-and-true directive to expand the money supply and boost economic activity, primarily by setting low interest rates to ensure appropriate appropriation by businesses, people, and banks. A quantitative view of an expansionary monetary policy involves central banks protecting assets from banks. As a result, bond revenues decline, and bank borrowing becomes more affordable. This boosts the capacity of banks to provide to individuals and industries.An expansionary monetary policy also runs the risk of accelerating price rises.As is well known, as the nominal exchange rate declines, the real exchange rate also declines, which causes the import to reduce and the export to increase.However, in the long run, if the nominal exchange rate changes, the real exchange rate would stay the same.This has the effect of preventing changes in the nominal exchange rate from also causing changes in the real exchange rate.

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