1. Consider the relative PPP. Suppose that Home inflation rate was 5% and Foreign inflation rate is 7%. In this case, what change does the relative PPP predict on Home currency: Appreciation, Depreciation, or No change? 2. The long-run exchange rate model is constructed based on the PPP equation and one more equilibrium condition. Answer which one: RH = RF + (Ee-E)/E, AMS MS = MD, MS/P = L(R,Y) MS