1. Future fixing of the exchange rate. During the beginning of the U.S. Reagan admin- istration in 1981, some U.S. officials seriously discussed the possibility of making a transition to a fixed exchange rate for the dollar. However, they argued that it would be presumptuous for government officials to decide the best exchange rate E and that they should instead let the market decide. The policy they proposed was to announce today that at some future date (say 7) they would permanently fix the exchange rate (using monetary policy) at whatever level prevailed in the market at time 7-1. Is this a coherent policy? You may answer using the simplest Cagan exchange rate model if you so choose. [Hint: See footnote 44.] Variants of the money-in-the-utility-function model.