3. These questions pertain to a fixed exchange rate. a. What are the advantages and disadvantages of a country adopting a fixed exchange rate? b. Suppose a country with a fixed exchange rate had persistently had higher inflation than the country to which their currency is tied. What effect would the persistent inflation have had on the country's real exchange rate? Explain. Your explanation should include the definition of the real exchange rate. c. Given the effect of the persistent inflationary differential on the real exchange rate, would there be any effect on the economy? Illustrate using the IS curve. Label the initial position, and assume the economy begins at a position of long run equilibrium. d. Could the economy endogenously recover from the effect of the persistent inflationary differential? Explain using the appropriate analytic tool. e. Define the current account and the financial account, and explain the relationship between them. f. Explain how the persistent inflationary differential might cause foreign currency reserves to be depleted. g. Is it necessarily the case that the persistent inflationary differential would cause foreign currency reserves to be depleted? Explain