Example4.3Supposetherearethreetypesofpeopleinourmodeloftwocountries and two currencies. Typeapeople can hold only the money of countrya, typebcan hold only the money of countryb, and typeccan hold the money of either country. Every person wants to hold 10 goods worth of money. There are 300 typeapeople, 200 typebpeople, and 100 typecpeople. There are 100 units of countryamoney and 200 units of countrybmoney.

1. Find the range of stationary equilibrium values forvta,vtb, andet.
2. Now suppose that 100 typeapeople and 100 typebpeople become typecpeople (able
3. to hold the money of either country). Now find the range of stationary equilibrium values forvta,vtb, andet. Has the range of equilibrium exchange rates expanded or contracted? Explain this change.