Question: Question 3. Using uncovered interest parity and its diagrammatic exposition, carefully describe the short-run impact of the following news on the nominal exchange rate between

Question 3. Using uncovered interest parity and its diagrammatic exposition, carefully describe the short-run impact of the following news on the nominal exchange rate between the United States and Europe. Describe your assumptions clearly. a) An article in The Economist describing a proposal for an expansion in the stock of money supplied by the European Central Bank. b) A recent CNN television news coverage about the costs of hurricane Katrina (August 2005). c) A Fox News announcement that the Central Bank of Japan will soon raise interest rates. d) An article in the Wall Street Journal about the Federal Reserve Bank raising the yield on treasury bills. e) An article in the Financial Times about further troubling news about budget deficits in European countries

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