Question 5. Consider the model of long run exchange rate determination developed in class that assumes prices were flexible and income is fixed. Assume that there are two countries, the US and Europe. There is no expectation of price stability. Determine the effects of the following events on the US exchange rate with Europe. Each event occurs separately. Europe increases its money supply by twenty percent. b. There is economic growth of ten percent in the U.S. At the same time, the US increases the money supply by twenty percent. Credit cards are legalized in Europe. This reduces the demand for money by fifteen percent. d. The US government reduces the government deficit by ten percent by increasing taxes. a. C