Suppose the U

Essay

Suppose the U.K. has instituted an expansionary monetary policy to fight unemployment in the economy. The U.K. has a floating exchange rate.
a.If the exchange rate value of the pound remains steady, what are the effects of easy money on British national product and income? What is the effect on the British unemployment rate? Explain.
b.Following the monetary expansion, what is the likely pressure on the exchange rate value of the pound? Explain.
c.What are the implications of the change in the exchange rate value of the pound for British national product and unemployment? Does the exchange rate change tend to reinforce or counteract the expansionary thrust of the British monetary policy? Explain.