It is 2020. Suppose that the new chairman of the Federal Reserve, Jared Kushner, decides that he would like the value of the Dollar to fall. Suppose also that prices are sticky in the short run but perfectly flexible in the long run. There is no expectation of long run price level stability. Suppose Jared increases the US money supply
Required:
a. What are the long and short run effects of the value of the dollar? On US interest Rates? On the US price level.
b. Suppose there is one other economy in the world, the Euro. Could the European authorities take action that would offset the effects of American monetary policies on the value of the dollar? In your answer to b. you need only consider the long run.
c. Arising from your answer in b. what problem do you see with any US attempts to depreciate the dollar?
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It is 2020. Suppose that the new chairman of the Federal Reserve, Jared Kushner, decides that he wou...
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