This question considers how the foreign exchange market will respond to changes in monetary policy. For these questions, define the exchange rate as Swiss Francs per Euro. Consider Swiss francs as the home currency and euros as the foreign currency. Use the foreign exchange and money market diagrams to answer the following questions. (a) Suppose the European Central Bank (ECB) permanently increases its money supply. Illustrate the short-run (label the equilibrium point B) and long-run effects (label the equilibrium point C) of this policy in the foreign exchange market. (b) Now suppose the ECB permanently increases its money supply, but investors believe the change is temporary. That is, they dont adjust their expected exchange rate because they believe the policy will be reversed before prices adjust. Describe how this situation would affect the spot exchange rate compared with (a). What happens in the long run? (c) Finally, suppose the ECB announces it plans to permanently increase its money supply, but doesnt actually implement this policy. How will this affect the foreign exchange market in the short run if investors believe the ECBs announcement? What happens in the long run?