(d) Based on the change in the equilibrium real interest rate identified in part (c), what will happen to financial capital flows to the United States? (e) Based on your answer to part (d), what will happen to the international value of the dollar in the foreign exchange market? Explain. (f) Based on your answer to part (e), will the Federal Reserve buy or sell yen in the foreign exchange market to stabilize the dollar/yen exchange rate? Explain.
(d) Based on the change in the equilibrium real interest rate identified in part (c), what will happen to financial capital flows to the United States? (e) Based on your answer to part (d), what will happen to the international value of the dollar in the foreign exchange market? Explain. (f) Based on your answer to part (e), will the Federal Reserve buy or sell yen in the foreign exchange market to stabilize the dollar/yen exchange rate? Explain.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Kindly answer D-F. Thank you.
![Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled
diagram must have all axes and curves clearly labeled and must show directional changes. If the question
you must show how you arrived at your final answer.
prompts you to "Calculate,"
Subi
Japan and the United States are major trading partners and the exchange rate between the Japanese yen
and the United States dollar is determined in a flexible foreign exchange market.
(a) Assume real income increased in the United States. Draw a correctly labeled graph of the foreign
exchange market for the yen, and show the effect of the increased real income in the United States on the
equilibrium exchange rate for the yen.
(b) Will each of the following increase, decrease, or stay the same as a result of the increase in the United
States real income?
(1) Japan's net exports. Explain.
(ii) Unemployment in Japan. Explain.
(iii) Japan's long-run aggregate supply
(c) Assume instead household savings increased in the United States. Draw a correctly labeled graph of the
loanable funds market in the United States, and show the effect of the increase in household savings on the
equilibrium real interest rate.
(d) Based on the change in the equilibrium real interest rate identified in part (c), what will happen to financial
capital flows to the United States?
(e) Based on your answer to part (d), what will happen to the international value of the dollar in the foreign
exchange market? Explain.
(f) Based on your answer to part (e), will the Federal Reserve buy or sell yen in the foreign exchange market
to stabilize the dollar/yen exchange rate? Explain.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F03cb2597-4c8d-4fb1-a043-54e278bbb9aa%2F34f15b53-47d4-4086-bb78-0f4ed1174a1f%2Fomepm3i_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled
diagram must have all axes and curves clearly labeled and must show directional changes. If the question
you must show how you arrived at your final answer.
prompts you to "Calculate,"
Subi
Japan and the United States are major trading partners and the exchange rate between the Japanese yen
and the United States dollar is determined in a flexible foreign exchange market.
(a) Assume real income increased in the United States. Draw a correctly labeled graph of the foreign
exchange market for the yen, and show the effect of the increased real income in the United States on the
equilibrium exchange rate for the yen.
(b) Will each of the following increase, decrease, or stay the same as a result of the increase in the United
States real income?
(1) Japan's net exports. Explain.
(ii) Unemployment in Japan. Explain.
(iii) Japan's long-run aggregate supply
(c) Assume instead household savings increased in the United States. Draw a correctly labeled graph of the
loanable funds market in the United States, and show the effect of the increase in household savings on the
equilibrium real interest rate.
(d) Based on the change in the equilibrium real interest rate identified in part (c), what will happen to financial
capital flows to the United States?
(e) Based on your answer to part (d), what will happen to the international value of the dollar in the foreign
exchange market? Explain.
(f) Based on your answer to part (e), will the Federal Reserve buy or sell yen in the foreign exchange market
to stabilize the dollar/yen exchange rate? Explain.
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