Suppose that Japan (country a) and China (country b) do not have foreign currency controls in effect. The total demand for money is always 2,000 goods in Japan and 1,000 goods in China. The fiat money supplies are 100 yen in Japan and 300 yuan in China.

(a) Find the value of each country's money if the exchange rate e_t(as defined in the text) is 3. Do the same if e_t= 1. Is one exchange rate likelier than the other? Explain.(10%)