Use payoff diagrams to illustrate how to hedge the macro risks in these situations using futures and options for both long and short positions in a foreign currency. If hedging is unnecessary, explain why.

a) The federal government spends $4 trillion on COVID-19 relief.

b) The United States experiences an expansion after the COVID-19 (assume that

consumption is less volatile than output).

c) Brexit causes a banking crisis in London which spooks international investors.

d) China stops purchasing U.S. Treasury securities.