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– Floating Exchange Rates Answer the following question using relevant theories and models from the course...

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Economics

– Floating Exchange Rates Answer the following question using relevant theories and models from the course literature (Macroeconomics: A European Perspective by Olivier Blanchard, Alessia Amighini, and Francesco Giavazzi). In your answers, you should explain and present the macroeconomic models you apply. In the United States, job reports continue to show record-high job creation. However, the U.S. central bank, the Federal Reserve (FED), predicts that economic activity will soon decline, leading the American economy into a recession during 2023. This expected recession is largely due to the contractionary monetary policy that the FED has pursued over the past year. Despite the expectation of an imminent recession, the FED recently raised interest rates once again. Question 2 The European Union is one of the United States’ largest export markets. What are the economic effects for the U.S. if: a) The European Central Bank also raises interest rates to combat its inflation?

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