Solve the Following

1. Consider the following cases and indicate for each case the direction and amount of changes in NX and NCO for the U.S. (e.g. NX decreases by $2, NCO increases by $3, etc.). Please circle your nal numerical answers and explain how you arrived at the numerical answers. The U.S. government uses 500,000 U.S. dollar's worth of previously obtained Chinese Yuan to buy 500,000 U.S. dollar's worth ofN-9S masks from a Chinese company. A department store chain in Japan uses yen to purchase 500,000 U.S. dollars from a U.S. bank. It then uses these dollars to buy DVDs from a U.S. lmmaker. A U.S. bank loaned the Korean government 1 million U.S. dollars. The Korean government then used the entire loan to buy ventilators from a U.S. healthcare equipment company. A British friend of yours tells you that \"traveling in the U.S. is much more expensive new (2020) than it was 2 years ago (2018). 2 years ago I only needed to use 70 pence to buy one U.S. dollar, now I need to use 80 pence to buy the same dollar!\" a. b. If there is no change in prices in the two countries during this three-year period (assume that price indices in both countries are normalized to be equal to 100 in 2018), is your friend's claim right or wrong? Explain your answer by calculating and comparing the real exchange rates om your friend's perspective (i.e. use the UK. as the home country). Units are very important here, so make sure you use the correct nominal exchange rate with U.K. as the home country. Round your answers to 2 decimal places. Now, suppose that there is 10% deation in the U.S. and 10% ination in the UK over this two year period (again, assume that price indices in both countries are normalized to be equal to 100 in 2018), is your friend's claim right or wrong? Explain your answer by calculating and comparing the real exchange rates from your friend's perspective (i.e. set the UK as the home country). Round your answers to 2 decimal places. If purchasing power parity (PPP) holds, what should be the correct pound-dollar exchange rate in 2020 if the 2020 prices are as you calculated in part b? Round your answers to 2 mm