:It is 2025, Donald Trump is once again president. There are three large economies in the world, China, the US and Europe.The following table gives expected growth rates of income (G) and money (M) for these economies.Assume that prices are flexible and ignore interest rates.Use the price level targeting approach developed in class.

USEuropeChina

G0.03-0.020.10

M0.06 0.05?

a.What is inflation in Europe?

b.What is inflation in the US?

c.Suppose that the Chinese central bank wants to keep its exchange rate unchanged with the U.S. What target should they have for their money supply growth?

d. Suppose that China wants to keep its exchange rate unchanged with Europe.What money supply growth rate should they set?