1. Analyse how a rapid expansion in world economic activity will affect an economy under a free-floating exchange rates regime

"Thus, the arrival of floating exchange rates in March 1973 was hailed by many economists as a healthy development in the evolution of the world monetary system, one that would put markets at center stage in determining exchange rates. (Krugman, Obstfeld, Melitz, International Finance: Theory and Policy, Eleventh Edition, p. 272)

When you consider both the arguments for floating (or flexible) exchange rates and the macroeconomic history of the world economy since 1973, do you agree that the move to floating exchange rates was a healthy development in the evolution of the world monetary system?

* This must be at least 2 paragraphs in length with a minimum of 200 words and a maximum of 400 words.

Consider a standard, small, open economy of the sort specified in the Mundell-Fleming model of chapter 13. Suppose the monetary authority increases the money supply in order to increase income. In which exchange-rate regime is this expansionary monetary policy effective: a floating-exchange-rate regime or a fixed-exchange-rate regime? Please defend your reasoning.

Typed answers only,  please

Examine the effects of a fiscal expansion in a small open economy. What are the effects of a fiscal expansion on income and the trade balance under (a) a fixed exchange rate regime; (b) a flexible exchange rate regime?