From 2009 to 2011, the economies of Australia andSwitzerland suffered relatively mild effects from theglobal financial crisis. At the same time, many countriesin the euro area were hit hard by high unemploymentand burdened with unsustainably high governmentdebts. How should this have affected the euro/Swissfranc and euro/Australian dollar exchange rates?

(1) In the IS-LM model, how does an increase in money supply affect theIS curve?(2) According to the Impossible Trinity, if an economy wants to allow for free capitalflows as well as to have full control over its currency, which exchange rate systemshould be adopted?(3) In an IS-LM model, if the investors are suddenly less willing to invest, then what effects does this change make to the equilibrium? Explain your intuitions.(4) According to your answers in (3), if the government wants to stabilize the interestrate using monetary policies, how should it behave? If the government, instead, wantsto stabilize the output level using monetary policies, what is your policy suggestion forit?

what can we call this if any increase occur in the value of money under flexible exchange rate system? and then what  will we call these increase and decrease of value of money if these both take place under the fix exchange rate system in the country

QUESTION 2Consider a country with a flexible exchange rate. If the central bank of this country raises its interest rate by 0.5%-points, whereas observers had anticipated an increase of only 0.25%-points, one can expect that: Bond prices and stock prices rise, the country’s currency depreciatesBond prices rise, stock prices fall, the country’s currency appreciatesBond prices fall, stock prices rise, the country’s currency depreciatesBond prices and stock prices fall, the country’s currency appreciates

Please state why it’s wrong or uncertain if applicable

Only typed solution

15. Which of the given statements concerning the market for foreign currency exchange is true? a. An increase in Canadian net capital outflow increases the supply of Canadian dollars and the Canadian dollar appreciates. b. An increase in Canadian net capital outflow increases the demand for Canadian dollars and the Canadian dollar appreciates. c. An increase in Canadian net capital outflow increases the demand for Canadian dollars and the Canadian dollar depreciates. d. An increase in Canadian net capital outflow increases the supply of Canadian dollars and the Canadian dollar depreciates. e. None of the above.

Why is it that in a pure, flexible exchange rate system,the foreign exchange market has no direct effect onthe money supply? Does this mean that the foreignexchange market has no effect on monetary policy?

14. Today many Central Banks around the World are thinking of Increasing interest rates. Why? What could be the dangers of increasing those interest rates too much? 15. What will happen to the trade balance and the real exchange rate of a small open economy when govenment purchases increase, such as during a war? Does your answer depend on whether this is a local war or a global war? On those grounds, In the current situation of the Russian invasion, what should happen between the dollar and the Euro?

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