$Ch3-$#$1(LOOP)$

$If$ a pound $of$ coffee beans costs $85$ pesos $in$ Mexico City and $340$ rupees $in$ New Delhi, under the condition $of$ the law $of$ one price, what should $be$ the rupe$\frac{e}{p}$eso exchange rate?

$Ch3-$#$2(Real$ Exchange Rate and $PPP)$

When the price $of$ a good $in$ the United States $is$ $$2,in$ Spain $is2,$ and the nominal exchange rate $isE\frac{\text{\$}}{}=1\mathrm{.}5,$ what $is$ the real exchange rate? Does $PPP$ hold? $Is$ $ overvalued $or$ undervalued? $By$ what percent? $In$ the long run, will $ appreciate $or$ depreciate?

The speed $of$ convergence $toPPPis15\%$ per year. What $do$ you predict the real exchange rate will $bein$ two years$$ time?

$Ch3-$#$3(Simple$ Monetary Model$)$

Under the monetary approach $to$ exchange rates, $if$ there $is$ a rise $in$ a foreign market's real income, and all else $is$ equal, what happens $to$ the nominal exchange rate? Does home currency appreciate $or$ depreciate?

$If$ Europe has a real $GDP$ growth rate $of5\%,$ and the United States has a real $GDP$ growth rate $of6\%,$ while money growth $in$ Europe $is7\%,$ and money growth $in$ the United States $is5\%,$ what would the monetary exchange rate model predict for exchange rates $in$ the long run?