(Answered) A now assume mario draghi head of the ecb becomes

Management Studies

a. Now assume Mario Draghi, head of the ECB, becomes concerned about deflation in Europe, and engages in expansionary monetary policy. What would likely happen to European interest rates? Explain.

b. What would likely happen to the spot foreign exchange rate, if the European interest rate went to 1% (use the Exchange Rate Channel of Monetary policy and the Covered Interest Parity Condition to show work and reasoning)?

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