4. a. If the dollar-pound exchange rate rises, has the dollar depreciated or appreciated? b.What has happened to the pound? 5.What is the difference between depreciation and devaluation? 6.Explain the purchasing power parity theory of the long-run behavior of the exchange rate. 7.Indicate whether there are any circumstances under which you would not expect the PPP relationship to hold. 8.Why do economists care whether or not PPP holds? 9.When is a country in external balance? Internal balance? Should either or both of these be policy goals? 10.According to the Mundell-Fleming model, when exchange rates are fixed and capital is perfectly mobile, will fiscal or monetary policy be more successful? Explain. 11.Your country is in recession. You feel that a policy of exchange rate depreciation will stimu- late aggregate demand and bring the country out of the recession. a. What can be done to trigger this depreciation? b. How might other countries react? C. When would this be a beggar-thy-neighbor policy