Suppose the president of the united states announces a new set of reforms that includes a new anti-inflation program. assuming the announcement is believed by the public, what will happen to the exchange rate for the u. s. dollar?

The dollar will appreciate. Because expected U. S. inflation falls as a result of the announcement, there will be an expected appreciation of the dollar and so the expected return on dollar assets will rise. As a result, the demand curve will shift to the right and the equilibrium value of the dollar will rise.