4. Suppose absoluTe PPP holds and prices are perfecTIy flexible (L; absoluTe PPP holds even in The shorT-run). a) CalcuIaTe The equilibrium exchange raTe Eussx (i.e. dollars per euro) based on The informaTion below: Real money demand in The UniTed STaTes is given by L3, = l.2Yus-2R$ Real money demand in The Eurozone is given by Lg = 3YEur- 4R Where gives naTional income in counTry/region x and Rx is The inTeresT raTe for currency x. The specific values, including also for nominal money supplies, are as in The following Table: P = 18 Nominal Money Supplies M503 = 6,000 =10,000 b) Now assume ThaT due To a producTiviTy increase, oquuT rises in The UniTed STaTes To 23.333 (everyThing else sTays The same). Recalculafe The equilibrium exchange raTe Eu3$/ (To one decimal poinT is fine). c) Did The dollar appreciaTe or depreciafe in parT b)? Explain your resulT