Refer to Figure 5-3. The deadweight loss due to the externality is represented by the area

The equilibrium exchange rate is 0.70 euros per dollar. At this exchange rate, the quantity demanded equals the quantity supplied and is $1.3 trillion a day. If the exchange rate is now 0.80 euros per dollar, then

A) there is a shortage of dollars and the exchange rate falls. B) there is no change. C) there is a surplus of dollars and the exchange rate falls. D) there is a surplus of dollars and the exchange rate rises. E) there is a shortage of dollars and the exchange rate rises.

Milton Friedman's k-percent rule says to set the rate of growth of the quantity of money equal to

A) the real interest rate. B) a constant rate. C) the rate of growth of potential GDP. D) the unemployment rate. E) last year's growth rate of real GDP.