If forecasted inflation rate in Mexico is 5% and in USA is 2%, calculate:

1. a) Spot Exchange rates (MP/$ and $/MP) variation. Which currency will appreciate and which will depreciate?

2. b) If forecasted inflation rate in Mexico grows to 10%, remaining in 2% in USA, calculate Spot Exchange rates (MP/$ and $/MP) variation. Which currency will appreciate and which will depreciate.