As per HOMEWORKLIB RULES E & Fquestion is answered
Answer:- To keep the exchange rate constant, the Bank of Korea must lower its money growth rate.
We can figure out exactly which money growth rate will keep the exchange rate fixed by using the fundamental equation for the simple monetary model
%ΔEewon/¥=(µK-gK)-(µJ-gJ)
The objective is to set %ΔEewon/¥=0:
(µK*-gK )=(µJ-g J )
Plug in the values given in the question and solve for µK*:
(µK*-6%)=(2.%-1%)
µK*=7 %
Therefore, if the Bank of Korea sets its money growth rate to 7%,
its exchange rate with Japan will remain unchanged.
Answer:- Using the same reasoning as previously, the objective
is for the won to appreciate: %ΔEewon/¥ <0
This can be achieved if the Bank of Korea allows the money supply
to grow by less than 7% each year.
3. Consider two countries, Japan and Korea. In 1996, Japan experienced relatively slow output growth (1%),...
4.* NOT To BE SUBMITTED (BUT GOOD PRACTICE FOR MIDTERM 1) Slightly modified version of Feenstra and Taylor (2018), International Macroeconomics, Ch.3, question 8. This question uses the general (long-run) monetary model, where money demand is inversely related to the nominal interest rate Consider two countries, Japan (J) and Korea (K), where the currencies used are the Japanese yen (JPY) and the Korean won (KRW). In 1996, Japan experienced relatively slow output growth (1%), while Korea had relatively robust output...
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pls answer part "d" specifically. Thanks! Q2. This question uses the general monetary model, where L is no longer assumed constant, and money demand is inversely related to the nominal interest rate. Consider two countries: Japan and South Korea. In 1996 Japan experienced relatively slow output growth (1%), while Korea had relatively robust output growth (6%). Suppose the Bank of Japan allowed the money supply to grow by 2% each year, while the Bank of Korea chose to maintain relatively...
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