Question: Finish Assignment documents, all the information is given below: 1. (a) If a country's Central Bank is following a fixed exchange rate regime, what will

Finish Assignment documents, all the information is given below:
1. (a) If a country's Central Bank is following a fixed regime, what will the domestic interest rate be equal to? (b) What is the expected rate of depreciation of the domestic currency?
2. (a) If there is a balance of payments surplus on private transactions, what will happen to international reserves? (b) Will there be an expansion or contraction of the domestic money supply?
3. Suppose there is a recessionary gap and an expansion in the domestic money supply is used to increase GDP (or Y) to close this recessionary gap. Using the asset market equilibrium graphs, how will the domestic interest rate and the tend to move if there is no intervention in the foreign exchange market? If the central bank wants to maintain the original parity, will the initial change in GDP be reinforced or offset with the maintenance of the exchange parity?
4. (a) What is the Marshall-Lerner condition? (b) What is the J-curve effect?
5. What were the factors proposed in favor of flexible exchange rates?

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