Assume that the country of Imperia (whose currency is the Imperian dollar

or I-dollar or I$) has external assets of I$ 20,000 billion, 50% of which are

denominated in euros (), the rest in I-dollars(I$). It also has external

liabilities of I$ 30,000 billion, 20% of which are denominated in euros (),

and the rest in I-dollars (I$).

Assume the exchange rate of Imperia is currently 1 Imperian dollar = 1 euro.

a. What is Imperia's external wealth in Imperian dollars? Is Imperia a net

creditor or debtor? [2]

b. What is Imperia's net position in euro-denominated assets in Imperian

dollars? [2]

c.Suppose the Imperian dollar depreciates to 1.2 Imperian dollars per euro.

What is the change in Imperian external wealth (in Imperian dollars)? [2]

d. Compared to a scenario with no net FX exposure, is this Imperian

depreciation likely to be more or less expansionary? Briefly explain. [4]