Question 2: The price of a Big Mac is 5$ in the USA (the home country). Using following table and the PPP to:

Compute the predicted exchange rate of local currency per US$. - Make an analysis about the difference between predicted exchange rates and the actual exchange rates; give your judgement on the accuracy of the PPP; and explain theoretically why PPP may be very misleading. - Now suppose a country (lets say Chile) increases its money supply (more specifically, increases the Domestic component of the countrys monetary base -D); explain the mechanism under which exchange rate changes using the PPP model and then the mechanism under which exchange rate changes using the Monetary approach to exchange rate (to see the difference between the two models)