Question: a. Assuming prices are fully flexible, discuss the effects that decreasing the growth rate of money supply has on domestic interest rates. Given this change

a. Assuming prices are fully flexible, discuss the effects that decreasing the growth rate of money supply has on domestic interest rates. Given this change in domestic interest rates, under the assumption of purchasing power parity, what is the predicted change in the dollar / euro exchange rate. b. Illustrate the dynamics of your answer to [a]. Draw those graphs and explain. Using four different figures, plot the time paths showing the effects of the permanent decrease in the growth rate of the US money supply on: [i] US Money Supply [ii] The dollar interest rate [iii] The US price level [iv] The dollar / euro exchange rat

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