With the aid of the prescribed literature - (International Economics Trade and Finance (International Student Version) - please answer the following questions based on the Macro economic model of International Finance.

1. Illustrate with a diagram and briefly explain the process involved to correct a deficit in a nations balance of payments by using the currency deprecation or devaluation approach. (20)

2. Illustrate with a diagram and briefly explain the process typically followed when the nations trade balance initially deteriorates before improving due to devaluing or depreciation its own currency. (10)

3. With the aid of graphs, explain the difference between a stable and an unstable foreign exchange market. (10)

4. Briefly explain dollarization and its costs and benefits. (10)