Please draw a figure illustrating the actions the central bank ...

[bclement10]

Please draw a figure illustrating the actions the central bank must take to maintain a fixed exchange rate following an increase in output.
 
  What will be an ideal response?

Question 2

The euro is said to be selling at a ________ if the spot dollar price is 1.18 and the nine-month forward rate is 1.16.
 
  A) forward discount
  B) forward premium
  C) forward spread
  D) none of the above

[carojassy25]

Answer to Question 1

A rise in output from to will increase the real money demand, so the central bank must purchase foreign assets and raise the money supply from to , in order to maintain a fixed exchange rate .

Answer to Question 2

A

[bclement10]

Thanks for the timely response, appreciate it

[nyrave]

TYSM