Question 2 The graphs below depict the markets for British Pounds Sterling (left panel) and Euros (right panel). In the left panel, the exchange rate (or alternatively, the price of one Pound Sterling) is denominated in Euros (E). In the right panel, the exchange rate (or alternatively, the price of one Euro) is denominated in Pounds Sterling (f). E1.50 canbroadcast Supply Exchange Rate (6/{) E1.40 -. Supply #61.00 E1.20 10.90 (1.10 E1.00 60.70 . Demand 30.90 E0.60 Demand 12 16 20 24 12 16 20 24 Quantity of Pounds Sterling (billions) Quantity of Euros (billions) Part (i): What is the equilibrium value of E1 in terms of British Pounds Sterling? Part (ii): What is the equilibrium value of 1 in terms of euros? Part (iii): Suppose that increase in the demand for British exports by EU households and firms increases the demand for British Pounds Sterling. The table below provides new quantities demanded of Pounds Sterling. Exchange Rate Quantity of Pounds Demanded E1.00 :26 billion E1.10 E22 billion E1.20 f18 billion $1.30 614 billion E1.40 E10 billion Identify the new equilibrium exchange rate of the British Pound Sterling. Has the pound appreciated or depreciated? Part (iv): Refer to part (ili) above. Identify the new equilibrium exchange rate of the euro. Has the euro appreciated or depreciated