1. With reference to the relevant four-quadrant diagram, use Harvey's model exchange rate model to discuss the potential impact on exchange rates and employment of a tightening in monetary policy....

1. With reference to the relevant four-quadrant diagram, use Harvey's model exchange rate model to discuss the potential impact on exchange rates and employment of a tightening in monetary policy. (4 marks)             2. Suppose the US Congress passed a piece of legislation to increase the statutory minimum wage from USD 7.25 per hour to USD 15.00 per hour. This might be expected to shift both the D and Z curves vertically in Harvey’s model. Explain the reasons behind each shift. (2 marks)3. Suppose the vertical shift of the D curve is greater than the vertical shift of the Z curve, and that no other curves shift in the model. Identify the predictions of the model for employment; interest rates; exchange rates and the trade balance. How might the predictions of the model change if the increase in the minimum wage caused speculators to expect the US dollar to depreciate? (4 marks)