Question: 2. (6 points) Monetary Approach to Exchange Rate Determination The follow table provides the money supply and real output in US and UK in 2010

2. (6 points) Monetary Approach to Exchange Rate Determination The follow table provides the money supply and real output in US and UK in 2010 and 2020. As- sume that V, the velocity of circulation of money is 5 in the US and 4 in UK. Assuming a exible exchange rate system, answer the following questions according to the monetary approach. M55 in MK in 2010 6000 1200 2020 9000 __- . (2 points) Calculate the price levels in US and UK in 2010 and 2020. (2 points) Calculate the exchange rate between dollar and pound in 2010 and 2020. (1 point) Did dollar appreciate or depreciate against pound over the period 2010-2020? Cal- culate the rate of appreciation or depreciation. D. (1 point) Is your result in part C consistent with the statement that the currency of a high-in- ation nation should experience depreciation against that of a low-ination nation? Explain briey. mu

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