True or False questions. Explain briefly your answer and use proper diagram when applicable. No credit without explanation.

(a)In Chapter 8, we saw that the weights with which a particular good enters in the consumption basket reflect differences in tastes across countries. Indicate whether the following statement is true, false, or uncertain:"If the weights with which a particular good enters in the consumption basket are different in Mexico and Canada, then those differ- ences in taste could reflect a preference for goods in which the countries specialize in and may lead to variations in the real exchange rate."Assume that Canadians spend a larger fraction of their income on maple syrup than Mexicans. And Mexicans spend a larger fraction of their income on avocado than Canadians.

Do not forget to provide the economic intuition behind your argument and to use equations to support your answer.

(b)Indicate whether the following statement is true, false, or uncertain:"A positive real interest-rate differential between country A and country B is indicative of the existence of restrictions on capital mobility between them."To answer this problem assume that there is no uncertainty. Do not forget to provide the economic intuition behind your argument and to use equations to support your answer.