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5. Relying on the article How Should Central Banks Respond to AssetPrice Bubbles? The 'Lean' vs. 'Clean' Debate Mishkin and the textbook bring two arguments
5. Relying on the article "How Should Central Banks Respond to AssetPrice Bubbles? The 'Lean' vs. 'Clean' Debate" Mishkin and the textbook bring two arguments for 'Leaning against' and two arguments for 'Cleaning' asset bubbles. (15 points) 6. Holding the supply of dollardenominated assets constant, what is the impact of the following changes on the dollar exchange rate, dened as the amount of other currencies a dollar can buy, with respect to other currencies? a) A rise in nominal domestic interest rates (5 points) b) A rise in expected import demand (5 points) NOTE: Figures are needed! 7. The New Zealand dollar (NZD) to US dollar (USD) exchange rate is 1.44 and the British pound (GBP) to USD exchange rate is 0.76. If you nd that the GBP to NZD were trading at 0.57, what would you do to earn a riskless prot?1 (10 points) 8. Explain and show graphically the effect of an increase in the expected future exchange rate on the equilibrium exchange rate, everything else held constant. (15 points) NOTE: Figures are needed
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