a. Under fixed exchange rate and given BP is flatter than LM the government faces an expected devaluation of the currency, show the impact on the US economy. Illustrate and explain!

b. Given a two point arbitrage how much money do you make given $1000 if you know that the exchange rates in NY and Tokyo are as follows: $1 = 150 Yen in NY and $1 = 200Y in Tokyo - what would you do !