Question: 2. (13 points) Now assume that commencing at time t=1, the Australian central bank announces an immediate increase to the (continuous) growth rate of the

2. (13 points) Now assume that commencing at time t=1, the Australian central bank announces an immediate increase to the (continuous) growth rate of the money supply, so that t=0.1 in Australia. Prices are fully flexible. Draw four graphs (including numerical values on axes) covering the period t=0 through t=2 that show: a) (2 points) The Australian log money supply, lnM; and b) ( 3 points) Australian log real money balances and nominal interest rate; and c) (2 points) The Australian log price level; and d) ( 2 points) The log exchange rate lnSt,AUD/USD. e) (4 points) Write an intuitive explanation for why there is a discrete jump in several of these graphs

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