Two relatively large, equal size, underdeveloped countries have fixed exchange rates with each other but wild swings in their growth rate. D grows by 4% in Y1 and -10% in Y2. F grows by -6% in Y1 and 12% in Y2. Each has a gold reserve of 10% of their total gold stock. (15 points)

b. Show the newtableif D managed to sterilize its gold flow without retaliation

If answer $$.$ is positive write "$$.$%",if negative write"-$$.$%". Example: for 4.5 write "4.5%", for -4.5 write "-4.5%".

dY1dY2dPdP*dGdGrDF

c. Suppose both D and F both attempted to sterilize their gold flows -- as a battle over political strength. Is this possible? Remember they could partially sterilize. What would be the ultimate result?

d. If this was aflexible exchange rateproblem, what change in E would be required for equilibrium?