1. Britain was on a fixed exchange rate in the early 1980's with Germany. Why did the reunification in Germany in the early 19905 and the resulting higher German interest rates cause a macroeconomic policy dilemma in Britain a) Lower interest rates in Germany meant that Britain had to increase its money supply. bj Lower interest rates in Germany meant that Britain had to cut its money supply. (] Higher interest rates in Germany meant that Britain had to increase its money supply. d) Higher interest rates in Germany meant that Britain had to cut its money supply e) None of the above 2. Which of the following sets of two events would unambiguously increase the gains from creating a fixed exchange rate between two countries? 3) The volume of trade between the countries increases and their business cycles become less synchronized. bj The volume of trade between the countries increases and their business cycles become more synchronized :) The volume of trade between the countries decreases and their business cycles become less synchronized. d) The volume of trade between the countries decreases and their business cycles become more synchronized. 3. Consider the case of a fixed exchange rate system as held in Europe before the Euro. All countries were fixed to Germany and capital was mobile a) Neither Germany nor the other countries have monetary policy autonomy. bj The countries fixing to Germany have monetary policy autonomy while Germy does not. c) Germany has monetary policy autonomy while the other countries do not. dj All countries have monetary policy autonomy