Please draw the time paths of the following 4 variables after a permanent increase in the U.S. money supply: (a) U.S. money supply; (b) Dollar interest rate; (c) U.S. price level; (d) Dollar/Euro exchange rate.

6. (10 points) Consider how the United States balance of payments accounts are affected when the following events happened.

(a) U.S. banks forgive two billion in debt owed to them by the government of Argentina.

(b) A U.S. citizen Lucy buys a newly issued share of stock in the U.K. oil giant BP. She places her order with her stockbroker, paying $500 with a check drawn on her money market account. BP, in turn, deposits the $500 Lucy has paid in its own U.S. bank account at Bank of America.