Use the monetary approach to answer each of the following. Be sure to spell out your assumptions clearly and explain all changes in all variables. Show what will happen in money-market and spot-FX-market graphs. a. The effect on e ($/pound) if Congress reduces taxes (ceteris paribus, i.e., all else remaining the same). b. The effect on the BOP (aka ORTB) under a fixed e if the Fed engages in a contractionary Monetary Policy, MP (cet. par.). What is meant by “sterilization” in this context?

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A: Referencehttps://www.imf.org/en/Publications/fandd/issues/Series/Back-to-Basics/Monetary-Policy

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