Refer to Figure 29-1. Currency speculators believe that the value ...

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Refer to Figure 29-1. Currency speculators believe that the value of the euro will decrease relative to the dollar. Assuming all else remains constant, how would this be represented?
 
  A) Supply would increase, demand would increase and the economy moves from D to A to B.
  B) Supply would decrease, demand would increase and the economy moves from A to D to C.
  C) Supply would increase, demand would decrease and the economy moves from C to B to A.
  D) Supply would decrease, demand would decrease and the economy moves from B to C to D.

Question 2

Using the Taylor rule, if the current inflation rate equals the target inflation rate and real GDP is greater than potential GDP, then the federal funds target rate ________ the sum of the current inflation rate plus the real equilibrium federal
 
  funds rate.
  A) will be the same as B) will be less than
  C) will be greater than D) may be greater than or less than

[ergserg]

Answer to Question 1

B

Answer to Question 2

C

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TYSM

[raili21]

Excellent