1.Investors compare dollar denominated assets with a nominal interest rate of .05.

Yen denominated attests have a yield of ,065,

The spot exchange rate is 100yen/$.

The expected exchange rate = 110yen/$

2. Which asset would the investor prefer? Explain why.How does the central bank manage a fixed exchange rate system when its currency begins to depreciate? Explain in detail.

3. SHOW HOW POLICYMAKERS CAN REDUCE THE FEDERAL BUDGET DEFICIT AND ALSO AVOID A RECESSION. USE A GRAPH ALONG WITH YOUR REASONING.