Question: 13 . Fixed exchange rates Consider the exchange rate between the Moroccan dirham and the euro. Suppose the Moroccan government and the eurozone governments agree

13 . Fixed exchange rates Consider the exchange rate between the Moroccan dirham and the euro. Suppose the Moroccan government and the eurozone governments agree to fix the exchange rate (ER) at 2.5 dirham per euro, as shown by the grey line on the following graph. Refer to the following graph when answering the questions that follow. 4.0 3.5 Supply of Euros EXCHANGE RATE (Dirham per euro) 3.0 ER 2.5 2.0 1.5 1.0 Demand for Euros 0.5 2 10 12 14 16 QUANTITY OF EUROS (Billions)

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=+ d. A one-time, permanent improvement in technology increases the amount of output that can be produced from any given amount of capital and labor.

=+ b. A change in weather patterns increases the depreciation rate.

=+growth. Use the graph to fi nd what happens to steady-state capital per worker and income per worker in response to each of the following exogenous changes.