Exercise 2 Decide if the following statements are true, false or if the veracity is uncertain. Explain your answers.

a. An economy subject to shocks should adopt a floating exchange rate regime to stabilize the output level.

b. With exchange rate depreciation, the domestic interest rates can be maintained lower than the international, given that with foreign currency a foreign investor can purchase more domestic currency.

c. In a fixed exchange rate regime, a country can follow an independent monetary policy by using sterilized interventions on the foreign exchange market.