1. Switzerland's economy is currently operating below full employment output.

(a) The central bank decides to stimulate the economy by targeting investment spending. Draw a correctly-labeled Money Market showing Switzerland's central bank activity. (2 pts)

(b) Switzerland is a trading partner with South Korea. Draw correctly-labeled side by side graphs of the foreign exchange market for the Swiss franc and for the South Korean won which shows the effect of the change in the interest rate from 1 (a) on the value of the Swiss franc relative to the South Korean won. (4 pts)

(d) How will the change identified in part (b) affect South Korean exports? Explain. (3 pts)