In two short (size: page and a half) essays:1) Explain how the foreign exchange market links the money markets of two countries. Discuss how expectations about the future exchange rate are effecting...

In two short (size: page and a half) essays:1) Explain how the foreign exchange market links the money markets of two countries. Discuss how expectations about the future exchange rate are effecting the current exchange rate. What are the underlying causes of these expectations? How do changes in the exchange rates effect current account?You may want to refer to the following articles in The Economist, “The not-so-mighty dollar”, page 9, The Economist, Dec. 6, 2003 and “Currencies, A faded green”, page 65, The Economist, Dec. 6, 2003. The links to these articles are under Reading in this module.2) If a country chooses to use monetary policy to try to influence inflationary pressure or recession, would it prefer a fixed or floating exchange rate system? Why? Discuss why a government might prefer a fixed exchange rate regime.