5] Suppose you learn that the cmrent exchange rate for the Japanese Yen is 51 = 121] yen. {NP} a. If you expect Japanese monetary growth to be a total of 25% larger over the next ten years than US monetary growi, what is your best guess as to the exchange rate ten years from now? 1r|."'..'hat theory underlies your prediction? Explain why we apply this theory here over a long run peod, like 1!] years, rather than over a short period, say less than a year?l b. If you expect that in addition to the higher money growth rate in Japan above, you also expect the output growth rate to be higher in Japan by 313%. Would you predict that the value of the Japanese yen will appreciate or depreciate relative the dollar {more or fewer dollars per rem}- E] Use the foreign exchange and money market diagrams to answer the ioliowing questions about the relationship between the lndian rupee [fj and the Euro {EUR}. Let the exchange rate he dened as rupees per yuan EINRE'Etrr. Suppose there is a fall in the Indian nominal money supply. Make the usual assumptions: IiIP holds, PPP holds in the long run, prices are sticky in the short run, [213p] a. Assume first that the fall in money supply is temporary [so that the nominal money supply "E pntbacl-r at its original level in the long run). illustrate the eects of this in a pair of graphs, one for the lndian money market and one for the foreign exchange market Label the initial equilibrium as point A, the short-rim equilibrium point B, and your long-run equilibrium point C