Here is a monetary policy rule. Assume that PPP, Quantity Theory, and the Fisher effect are correct.

c. Lithuanias central bank targets the exchange rate. It keeps the lita within 15% of its target exchange rate of 3.4528 litas per .

1) What are the upper and lower limits of this exchange rate band?

2) Assume euro inflation is 2% per year and Lithuanian inflation is 5%. By what percent will the lita depreciate against the euro?

3) For how long can the lita stay within the band?

4) Is a fixed exchange rate within a band enough to have Lithuanian inflation converge to Eurozone inflation?