8. Since 2008, the dollar has generally appreciated against the euro.

a. Suppose that in the short run, the Fed wanted both to weaken the dollar (that is, stop its appreciation and/

or cause it to depreciate) and stimulate investment.

Based on what you have learned in this chapter and in Chapter 13, discuss whether the Fed can achieve both of these goals simultaneously through monetary policy.

b. Suppose instead that the European Central Bank conducts contractionary monetary policy. What is the short-run effect, if any, of this policy on the euro-

per-dollar nominal exchange rate and on the real exchange rate between the United States and the eurozone? In your answer regarding the real exchange rate, state any assumptions you are making.