Draw the Demand for and Supply of the U

question 10

Essay

Draw the demand for and supply of the U.S.dollar in each of the following cases.Diagram and explain in words the effect of each of the following events in the short run.Make sure to properly label the axes.In each case,assume the two countries under consideration are important trading partners.
(a) There is an increase in the real interest rates in the United States relative to Japan.
(b) Investment returns in the United States decrease relative to expected returns in Japan.
(c) Inflation in Japan fell relative to the inflation rate in the United States.
(d) The Japanese expect the value of the U.S.dollar to decline.
(e) The Federal Reserve raised interest rates fearing the inflationary pressures of a booming U.S.economy.

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