Answer questions discussed in the video: https://www.youtube.com/watch?v=EHAXNpRPE-I

Question 1 1 pts When joining the ERM, the British government set the nominal exchange rate to 1 pound = [ans1] Deutsche marks. (Note: this is the inverse of the nominal exchange rate defined in our course if assuming the U.K. to be the domestic country. Therefore, a lower pegged value implies a cheaper pound = a devaluation.)Question 2 2 pts According to the video, Germany experienced inflation in 1992 due to the reunification, which led the Deutsche Bundesbank, the central bank of Germany, to interest rate. O rising; increase O rising; decrease O lower; increase O lower; decreaseQuestion 3 6 pts In 1992, the UK. experienced an economic recession with a high unemployment rate and low housing prices. if the Bank of England followed the interest rate in Germany, how would this affect the UK. economy? Please explain with a xed-exchange- rate AS-AD model. (Hint: You can assume that the output is below the natural level of output initially and explain how a change in the interest rate affects the AS and AD curves and the economy.) Question 4 4 pts Please explain with the interest parity condition why lower interest rates in Germany (keeping the interest rate in the U.K. at the current level) may help the U.K. to avoid a devaluation.Question 5 1 pts Suppose that you are an investor in foreign exchange markets. If you anticipate a devaluation of the currency, you are likely to O sell the currency 0 buy the currency Question 6 2 pts Consider the situation that policymakers in the UK. faced: Investors in foreign exchange markets anticipated a devaluation for the UK (Hint: Use your intuition from the last question). Further, policymakers in the U.K. intended to continue to x its nominal exchange rate' In order to maintain the peg of the currency at its original level, which of the following must occur? (More than one answer) :] increase the domestic interest rate :] buy pounds in foreign exchange markets 3 convince trading partners to raise their interest rates 3 increase the domestic price level Question 7 2 pts Part of the reason for the European exchange rate crisis of 1992 was: O the need for the German mark to appreciate relative to other European currencies. O the high interest rate in non-German countries. O the need for a smaller German budget deficit after German reunification. O the need for the British pound to be tied to gold.Question 8 2 pts Which of the following is an argument of opponents of devaluations? O A devaluation causes a nation with xed exchange rates to lose credibility in the medium run, driving its interest rate higher. 0 Devaluations have no impact on domestic output. 0 Devaluations cause relatively slow adjustments. 0 Participants in foreign exchange markets have a short memory: if the expected devaluation doesn't occur within a short time-period, they will stop expecting it