This preview shows page 1. Sign up to view the full content.
Unformatted text preview: f the exchange rate changes from $1=Y200 to $1=Y100, we can say the dollar has (apprec/deprec) in value & Japan’s exports to the U.S. (incr/decr).
31. Depreciation of the euro relative to the U.S. dollar would make a trip by an American to Europe (more/less) expensive.
32. Suppose that yesterday $1 would buy 800 South Korean won, but today will buy 810 won. We can conclude that the won has (depr/apprec) in value. Higher I. R.’s or Lower PL Appreciate the S2
Price of the Yen depreciates as it takes more Yen
to buy a dollar. Yen depreciates even more as it takes even
more to buy a dollar. U.S Price level Decreases
Interest rates Increase 150
0 Quantity of Dollars Japanese buy more U.S. X
U.S. citizens buy M fewer Japanese A Increase in the
demand for ’s
Decrease in the
supply of ’s for Appreciates Double Shifts: Although there are double shifts in some situations,
it doesn’t change the appreciation/depreciation answers. So – let’s just
concentrate on the demand curve for each situa...
View Full Document