Show all necessary formulas and equations for each question.

Suppose the government is running 3 budget deficit (previously the budget was balanced) Explain in detail what happens in the following markets: Loanable Funds Market (draw a diagram) Net Capital Outflow (draw a diagram) Foreign Currency Exchange (draw a diagram) US Net exports The January 29,2014 nominal exchange rate for the following currencies were as follows: Find the indirect quotation for December 4, 201S and determine whether the currencies haw appreciated or depreciated, and by how much For each currency, explain what is happening in the Foreign-Currency exchange market and in the trade balance between the US and each of these countries A Big Mac costs S3.S0 in U.S., 60 pesos in Mexico. The nominal exchange rate is e = 17.0S pesos per $USO. Compute the real exchange rate. Does the real exchange rate follows the "law of one price'? (i.e. follows the Purchasing Power Parity condition?). If it does not, what would be exchange rate according to the PPP condition? Explain. If the CPI inflation rate is 12% m Mexico and 2% in the US. what will happen to the exchange rate? Explain. Suppose the government is running 3 budget deficit (previously the budget was balanced) Explain in detail what happens in the following markets: Loanable Funds Market (draw a diagram) Net Capital Outflow (draw a diagram) Foreign Currency Exchange (draw a diagram) US Net exports The January 29,2014 nominal exchange rate for the following currencies were as follows: Find the indirect quotation for December 4, 201S and determine whether the currencies haw appreciated or depreciated, and by how much For each currency, explain what is happening in the Foreign-Currency exchange market and in the trade balance between the US and each of these countries A Big Mac costs S3.S0 in U.S., 60 pesos in Mexico. The nominal exchange rate is e = 17.0S pesos per $USO. Compute the real exchange rate. Does the real exchange rate follows the "law of one price'? (i.e. follows the Purchasing Power Parity condition?). If it does not, what would be exchange rate according to the PPP condition? Explain. If the CPI inflation rate is 12% m Mexico and 2% in the US. what will happen to the exchange rate? Explain