I. True/False/Uncertain - Briefly explain. No credit without an explanation (8 marks each). 1. If the current USD/CAD exchange rate is 0.7809 US dollars per Canadian dollar and EPPP = 0.83, the Canadian dollar is undervalued. 2. A higher real interest rate r* would lead to domestic real currency depreciation. 3. A higher domestic nominal interest rate would lead to domestic currency nominal depreciation. 4. Inflation is equal to money supply growth in a growing economy. 5. Flexible nominal exchange rate can compensate lack of downward wage flexibility as an adjustment mechanism to Sudden Stops