1. In a simple monetary model of the exchange rate, liquidity preference is a constant, L=5 for both the US and Australia. In the US, the price level is 4. In Australia, the nominal supply of money is 150. For the Americans, the exchange rate is 0.8. Find the real output/transactions in Australia. 2. Now the US price level changes to 6. And in Australia, the nominal money demand is 30 and the nominal money supply is 240. Find the new exchange rate and use it to find the rate of AUD appreciation from the 0.8 in the previous question.

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