The FED decides to intervene exchange rate of U.S. dollar by purchasing $ 1 million foreign assets. Based on the following cases, analyze the effects of FEDs intervention on monetary base and on exchange rate. Give a brief explanation using demand and supply diagram. (Hint: it is possible that FEDs intervention has no effect on exchange rate.) (4)

1. If FED pays currency;
2. If FED pays U.S. government securities.