1. (4 points) What are the effects on the aggregate output market from an increase in the money supply in the Monetary Intertemporal model? Why is this the case? Show with graphs. 2. (4 points) What are the key differences in assumptions between the Real business cycle (RBC) model we studied and the New Keynesian Model without inflation we studied? What is the optimal policy for the government in the RBC model we studied? 3. (4 points) Suppose we are starting from the bliss point in the New Keynesian model with inflation. Now suppose that anticipated inflation exogenously decreases. Explain what the optimal policy in this case would be and show with a graph. 4. (4 points) Graph and explain the differences in the impacts on the aggregate output market from an temporary increase in government spending in the real intertemporal model and the small-open- economy model we studied (i.e., the domestic aggregate output market). 5. (4 points) What are the key pros and cons of a fixed versus a flexible exchange rate regimes ?

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