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14. Consider our more general Supply and Demand model of exchange rate determination. Think of the US. as the domestic countrv and Great Britain (GB) as the foreign country. Let "e\" stand for the crease in the supply of E and an increase in e.. mreign currency. 433q14n16grph.png If eexp lie, the expected exchange rate) increased, ceteris paribus, then we would expect A an increase in the demand for E and an increase in e. IAI an increase in the supply of and an increase in e. IAI a decrease in the demand for E and an increase in e. IAI a decrease in the demand for E and a decrease in e. A an increase in the demand for E and a decrease in e. Question 15 2.3 pts 15. Suppose we expect the exchange rate, 2 between the dollar and the pound to increase in the near future. Then none of the other options are correct. this would mean we expect a depreciation of the E. this would mean we expect an appreciation of the dollar. a speculator could make money by selling Es now and buying them back later. a speculator could make money by selling $s now and buying them back later. Question 16 2.3 pts 16. If a central bank of a country is trying to peg the exchange rate (i.e., domestic price of the foreign currency) below the equilibrium that would prevail if there were no intervention in the currency market (e. on the graph below), then 433q14n16grph.png 2Question 16 2.3 pts 16. If a central bank of a country is trying to peg the exchange rate (i.e., domestic price of the foreign currency) below the equilibrium that would prevail if there were no intervention in the currency market (e on the graph below), then 433q14n16grph.png ? none of the other options. the domestic bank would have to buy the excess supply of the foreign currency. the domestic central bank of this country would see a decrease in its international reserves, ceteris paribus. the domestic central bank of this country would see a decrease in its reserves of the domestic currency, ceteris paribus. we might figure that they are doing this because they want to promote their exports.Question 17 2.3 pts 17. Suppose we have the following information on interest rates and exchange rates (between the US and the Great Britain (G 3)). Nominal interest rate in US: i5 = 0.03 (3%) Nominal interest rate in GB: iE = 0.02 (2%) II M Exchange rate ($ price of 1): e Expected exchange Rate: 6'5"\" = 2.04. Given this information, (\"I people have equal incentive to hold either currency. people have incentive to hold $ (i.e., invest in $ denominated assets). If\"; none of the other options. (\"I people have incentive to hold (i.e., invest in denominated assets). (\"I the expected return to holding E is 0.05 (i.e., 5%)