1. Use the short-run asset approach to predict the effect of a temporary increase in money supply in the U.S. on expected future exchange rate of dollar against euro and spot exchange rate of dollar against euro.

2. Use both short-run asset approach and long-run monetary approach to predict the effect of a permanent increase in money supply in the U.S. on expected future exchange rate of dollar against euro, spot exchange rate of dollar against euro, and the adjustment from short run to long run.

3. If a country adopts a fixed exchange rate policy, can it use effective monetary policy in response to a recession? Why?

4. What is the trilemma?