Solution-Federal reserve bank engages in a temporary

Federal reserve bank engages in a temporary decrease

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Reference no: EM131395453

1) If Denmark wished to keep its exchange rate with the euro fixed, what monetary policy options are available to lower unemployment in the short run?

Denmark has all the options available to it, because domestic monetary policy is conducted inside the nation and has no bearing on its international variables.
Traders would realize that any monetary policy actions taken inside a nation would improve economic conditions without affecting international variables.
Denmark cannot use any monetary policy that would cause its short-run exchange rate to depreciate against the euro.
Denmark's monetary action would restore confidence and help keep its currency stable.

2) Suppose a country has decided to peg to the dollar. Explain what will need to happen if the Federal Reserve Bank engages in a temporary decrease in money supply.

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Federal reserve bank engages in a temporary decrease

Reference no: EM131395453

Reference no: EM131395453

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