Exchange rate, E 080 AA Output, Y Question 6 Suppose that the economy is at an equilibrium point, as illustrated in the figure. 1. If the government central bank decreases temporarily money supply which curve is going to move and in what direction? 2. If the government decreases temporarily public expenditure, which curve is going to move and in what direction? 3. To obtain an appreciation of the exchange rate, should we decrease money supply, public expenditure or it does not matter