Question

1. Show and describe the effects in US asset markets of the European Central Bank (ECB) implementing expansionary monetary policy in response to a recession. What are the effects on simultaneous equilibrium in the money and foreign exchange markets from the US’ perspective? How does the ECB create the change in the European money market? What happens to the rates of return on deposits? What is the ultimate impact on the USD/EUR exchange rate?
2. The policy scenario described in question 5 is a response to short-run fluctuations. Does that result match up with the long-run response of e? Illustrate and describe the ultimate long-run response of the exchange rate to such a policy. Is there a disconnect between the classical long-run concept of the Quantity Theory of Money and the ultimate change? Why or why not?
3. please answer my question

Answer 1

There are several actions that a central bank can take that are expansionary monetary policies. Monetary policies are actions taken to affect the economy of a country. The key steps used by a central bank to expand the economy include:

• Decreasing the discount rate.
• Purchasing government securities.
• Reducing the reserve ratio.

All of these options have the same purpose—to expand the supply of currency or money supply for the country.

• A central bank, such as the Federal Reserve in the U.S., will use expansionary monetary to strengthen an economy.
• The three key actions by the Fed to expand the economy include a decreased discount rate, buying government securities, and lowered reserve ratio.
• One of the greatest examples of expansionary monetary policy happened in the 1980s.
• The Fed also implanted an expansionary policy during the 2000s following the Great Recession, lowering interest rates and utilizing quantitative easing.

In the foreign exchange market, supply and demand typically both move at the same time. Groups of participants in the foreign exchange market like firms and investors include some who are buyers and some who are sellers. An expectation of a future shift in the exchange rate affects both buyers and sellers—that is, it affects both demand and supply for a currency.

The shifts in demand and supply curves both cause the exchange rate to shift in the same direction; in this example, they both make the peso exchange rate stronger. However, the shifts in demand and supply work in opposing directions on the quantity traded. In this example, the rising demand for pesos is causing the quantity to rise while the falling supply of pesos is causing quantity to fall. In this specific example, the result is a higher quantity. But in other cases, the result could be that quantity remains unchanged or declines.

The European Central Bank (ECB) is the central bank responsible for monetary policy of those European Union (EU) member countries which have adopted the euro currency. This region is known as the eurozone and currently comprises 19 members. The principal goal of the ECB is to maintain price stability in the euro area, thus helping preserve the purchasing power of the euro

The European Central Bank was established in 1999. The governing council of the ECB is the group that decides on changes to monetary policy. The council consists of the six members of the executive board of the ECB, plus the governors of all the national central banks from the 12 euro area countries. As a central bank, the ECB does not like surprises. Therefore, whenever it plans on making a change to interest rates, it will generally give the market ample notice of an impending move through comments to the press. The governing council meets twice a month, but policy decisions are generally only made at meetings where there is an accompanying press conference, and those are held every six weeks.

The recent history of the U.S. clearly illustrates the critical importance of a country's overall perceived political and economic stability in relation to its currency valuations. As the U.S. government and consumer debt rise, the Federal Reserve movers to maintain interest rates near zero in an attempt to stimulate the U.S. economy. When the economy recovers and grows, the Fed responds by incrementally raising interest rates.

Even with historically low-interest rates, the U.S. dollar still enjoys favorable exchange rates in relation to the currencies of most other nations. This is partially due to the fact that the U.S. retains, at least to some extent, the position of being the reserve currency for much of the world.

Also, the U.S. dollar is still perceived as a safe haven in an economically uncertain world. This factor—even more so than interest rates, inflation, or other considerations—has proven to be significant for maintaining the relative value of the U.S. dollar