The country in this question is small open economy with a fixed exchange rate and is currently in its long-run equilibrium. Each part of the question isNOTrelated to other parts of the question. Also, for each part of the question support your answer withONEDD-AA diagram.

a) "When the central bank of the country's anchor/reserve currency adopts a contractionary monetary policy, the change in monetary policy by its anchor currency's central bank bank cannot be considered a beggar-thy-neighbor policy because it has no impact on the country's output and current account in the short run." True/False/Uncertain, explain.

b) Suppose the market treats domestic assets and foreign assets as imperfect substitutes and domestic assets are perceived to be riskier. Recently, the (domestic) government passes new laws to close the loopholes in the country's financial and banking sectors permanently, and the market reacts positively to these changes. What happens to the country's nominal interest rate and current account in the short run? Explain.