Question 3. Guatemala is a small country in Central America. It has a fixed exchange rate with the U.S. The Monetary base for Guatemala is 100. Domestic Credit is 40. The interest rate in Guatemala is 0.05 while the interest rate in the US is 0.05. There is an open capital market and relative PPP holds at all times. Using the model and the assumptions developed in class, answer the following questions. a. What is the backing ratio for Guatemala? b. By how much does Guatemala need to increase its foreign reserves to enable it to form a currency board? c. Suppose Guatemala increases domestic credit to 60. What is the change in the monetary base? d. If inflation in the US is two percent what is the real interest rate in Guatemala? Question 3. Guatemala is a small country in Central America. It has a fixed exchange rate with the U.S. The Monetary base for Guatemala is 100. Domestic Credit is 40. The interest rate in Guatemala is 0.05 while the interest rate in the US is 0.05. There is an open capital market and relative PPP holds at all times. Using the model and the assumptions developed in class, answer the following questions. a. What is the backing ratio for Guatemala? b. By how much does Guatemala need to increase its foreign reserves to enable it to form a currency board? c. Suppose Guatemala increases domestic credit to 60. What is the change in the monetary base? d. If inflation in the US is two percent what is the real interest rate in Guatemala