need help solving with work shown

1. (1o points) Ifthe Thai interest rate is 0.5%, the U.5. interest rate is 2.5% and the expected dollar-baht exchange rate is E95,\"; = $0.01,!B, what theory could you use to find the spot dollar-baht exchange rate Egg? What is the value of the spot exchange rate according to the theory? (21] points) a) Why do we not use purchasing power parity theory in the short-run? Explain your reasoning. b] If purchasing power parity between two countries were to hold, does this mean that the law of one price must necessarily hold for each good? Explain why or why not and provide an example. (20 points] Consider a world with two countries, Thailand and Canada. At a given point in time, there is a temporary decrease in Thailand's money supply. Assume that nothing in else in the Canadian and Thai economies changes. a] What happens to Egg, the baht-dollar exchange rate, in both the short-run and long- run? Explain your answer in words and by using whatever figures and equations you find appropriate. b] Is the short-run exchange rate, Eros, above or below the expected long-run exchange rate? Explain the dynamics of the exchange rate over time with the help of a diagram. (20 points) Consider a world with two countries, Thailand and Canada. At a given point in time, there is a permanent decrease in Thailand's money supply. Assume that nothing else in the Canadian and Thai economies changes. a] What happens to Em, the baht-dollar exchange rate, in both the short-run and long- run? Explain your answer in words and by using whatever figures and equations you find appropriate. b] Is the short-run exchange rate E335 above or below the expected long-run exchange rate? Explain the dynamics of the exchange rate overtime with the help ofa diagram