1. If milk costs 4 USD per gallon in the United States and 3 GBP per gallon in Great Britain, if there is purchasing power parity, what is the nominal exchange rate? What is the real exchange rate? 2. If milk costs 3 USD per gallon in the United States and 2.50 GBP per gallon in Great Britain, the nominal exchange rate is 0.75, what is the real exchange rate? 3. List a domestic and a foreign entity who would benefit if the dollar appreciated. List a domestic and a foreign entity who would be harmed if the dollar appreciated. 4. Japan generally runs a significant trade surplus. Of the following options, which one(s) could be a cause of this trade surplus according to the model from this unit. . A high Japanese saving rate relative to Japanese domestic investment . Structural barriers against imports into Japan . High foreign demand for Japanese goods . Warm weather in Africa . Low Japanese demand for foreign goods 5. If the U.S. government ran a larger budget deficit, how would that affect the market for loanable funds? How would that affect net capital outflow? How would that affect the strength of the dollar? 6. If U.S. goods were less desirable in the rest of the world than they used to be, how would that affect the market for loanable funds? How would that affect net capital outflow? How would that affect the strength of the dollar? 7. If people perceived U.S. banks to be substantially safer than banks in the rest of the world, how would that affect the market for loanable funds? How would that affect net capital outflow? How would that affect the strength of the dollar? 8. If households in the United States decided to save more money, how would that affect the market for loanable funds? How would that affect net capital outflow? How would that affect the strength of the dollar