2. Botswana, Qatar, South Africa, and India all have central banks which have decided not to peg the value of their currencies in the foreign exchange market. Therefore, these countries are operating a floating exchange rate in the FOREX.

Now assume that Egypt increases its minimum wage and this policy results in detracting direct investment.

(a). Draw a correctly-labeled graph of the Loanable Funds market showing the effect on direct investment and the real interest rate in Egypt.

(b). How will the real interest rate change in Egypt that you identified in part (a)(i) affect the employment level in Egypt in the short run? Explain.

(c). Say the inflation rate is 5% in Botswana and 10% in South Africa. What will happen to the value of Botswana's pula relative to the South African rand as a result of the difference in inflation rates?Explain.