1. Explain under which conditions the following statement is true: “The central bank can

control either the exchange rate or the money supply, but not both.”

2. Explain precisely how the exchange rate affects the curves in the graphic Mundell-

Fleming model. As an illustration, explain how an appreciation of the currency affects the

economy’s equilibrium level of GDP.

3. In the early 1980s, United States macroeconomic policy combined a tight monetary policy

to combat lingering inflation and very expansionary fiscal policy resulting from a sharp

reductions in taxes. Use the Mundell-Fleming model to illustrate the effects of this

combination of policies on the exchange rate.

It is my assignment, since my undergraduate is not economics, so I do not know how to answer the questions. Could you help me to figure them out? Thank you very  much!