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Both parts please. 2. Growth rates of real exchange rates. (a) Let's denote the growth rate of a variable X by gX. Show that gs

Both parts please.

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2. Growth rates of real exchange rates. (a) Let's denote the growth rate of a variable X by gX. Show that gs \" 913 + 7T 7T* for small gs, g5, 1t, and n*, where n and 7t* are the ination rates in a domestic and foreign country. (HINT: Start from E = E P /P*. Remember that the log difference of a variable X, A In X, is similar to 9X when gX z 0.) (b) Suppose that the domestic currency depreciated by 3%. During the same period, the ination rates in the domestic and foreign country were 2% and 4%, respectively. What would happen to the real exchange rate during the same period

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