This preview shows page 1. Sign up to view the full content.
Unformatted text preview: st rate in the U.S. increases to 8% while the real interest rate in
Japan decreases to 6%.
a. How & why will financial capital flows be affected
by this change in real interest rates?
[financial capital, not real capital]
b. Using a correctly labeled graph for the yen
market, show and explain how the value of
the yen will change relative to the value of
c. Explain how the change in the value of the
yen will affect each of the following in the U.S. (D) # of Yen
(1.) Imports from Japan
(2.) Exports to Japan
Exports Yen Price of Dollar 1. Assume that the U.S. trades with Japan. Draw a correctly labeled graph
of the foreign exchange market for the U.S. dollar . Let’s say that
United States output [GDP] decreases. Show & explain how the supply
of the U.S. dollar will be affected in the foreign exchange market ..
Y100 E2 E1 Answer 1: The decrease in
real U.S. output will cause
job losses in the U.S...
View Full Document
This note was uploaded on 07/20/2012 for the course ECON 2106 at GCSU.