1. Honduras fixes its currency, the Honduran lempira (HNL), to the U.S. dollar. Suppose Honduras can be described using the AA-DD model. Consider changes in the exogenous variables in the left column. Suppose each change occurs ceteris paribus. Indicate the short-run effects on the equilibrium values of Honduran GNP, the Honduran interest rate (i_HNL), the Honduran trade deficit, and the exchange rate (E_HNL/$). Use the following notation:

+ the variable increases

the variable decreases

0 the variable does not change

A the variable change is ambiguous (i.e., it may rise, it may fall)

	GNP	iHNL	EHNL/$
An increase in U.S. interest rates
A decrease in U.S. interest rates