Suppose you have the following information about the exchange rates for country C: Country A B C A 1 E3,, .4 B EM3 Earn 8 C Em: EM: 1 Complete the rest of the table assuming that triangular arbitrage holds. 5. Use the information below to answer question 5. L M Y u.s. .1 2,900 10,900 U.K. .04 500 5,009 a. Calculate the price levels in both the U.S. and the U.K. according to the quantity theory of money. b. Calculate the nominal exchange rate (dollars per pound) assuming the quantity theory of money and absolute PPP. c. Assume that the U.S. money supply rises to 2,200 in the U.S. and to 600 in the U.K. Calculate the new nominal exchange rate. 6. Assume that the current dollarEuro exchange rate (%m) is equal to 1, the real exchange rate (qmmw) = 1.25, the price level equals 2 in the U.S. and 2.5 in Europe. Assume that relative PPP holds. a. If inflation is 5% in the U.S. but 2% in Europe, what will be the price levels in the U.S. and Europe a year from now? b. What will be the nominal exchange rate (E ) a year from now? $f c. what will the real exchange rate be a year from now? 7. Assume that output growth in the U.S. is 2%, money demand (L) is constant and money supply growth is 4%. Assume that output growth in China is 5%, L is constant and money supply growth is 9%. a. Assume that relative PPP and the quantity theory of money holds. what is the growth rate of the dollar-China exchange rate