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Helpt with monetary theory economic questions? (exchange rates)?

• Here are some questions, I am just not sure, if i had to guess i would put 1 c 2 a 3 b/c. I just want to get on the right track here. Any help answering these challening questions would be apprecated nd would help put me on the right track as i do my homework problems 1. Use the model of exchange rates and aggregate expenditure and assume the central bank holds interest rates fixed. If the Colombian central government is able to defeat the drug cartels, ceteris paribus, you would expect Colombian output to ________ because of a ________ and a ________ in inflation. A) rise; real exchange rate depreciation; fall B) not change; real exchange rate depreciation; rise C) fall; real exchange rate appreciation; fall D) rise; real exchange rate appreciation; rise 2. Use the model of exchange rates and aggregate expenditure and assume the central bank holds interest rates fixed. If the two Belgian regions Walloon and Flanders threaten to break to form two different countries, ceteris paribus, you would expect Belgian output to ________ because of a ________ and a ________ in inflation. A) rise; real exchange rate depreciation; rise B) fall; real exchange rate appreciation; fall C) not change; real exchange rate depreciation; rise D) rise; real exchange rate appreciation; rise 3. If the central bank stabilizes the economy after a fall in confidence, it will ________ the real interest rate, which will cause a(n) ________ in the real exchange rate. A) increase; fall B) decrease; fall C) decrease; rise D) There is not enough information provided to answer the question.

• Answer:

  the answer is A obviously: when the price if low everybody want to buy however the exchangerate should be good