1. Explain how each of the following changes the money supply of the local economy.
a. The People's Bank of China increases the reserve requirement of commercial banks in mainland China.
b. The Hong Kong Monetary Authority uses Euro to buy U.S. dollars.
2. Discuss two limitations of the consumer price index (CPI) as a measure of the cost of living.
3. Describe what the meaning of real exchange rate is. If a country has a real exchange rate larger than 1, then what does it mean?