Suppose that US inflation rate is higher than Japan’s inflation rate. How would this affect the exchange rate between the $ US and the yen?
As it has been given that US inflation rate is higher than Japan’s inflation rate. So US goods and services are expensive compared to Japan goods and services. So USA import increases and export decreases. Hence demand for Yen increases and demand for USA dollar decreases. Hence dollar will depreciate and Yen will appreciate. Hence exchange rate will increase.
Suppose that US inflation rate is higher than Japan’s inflation rate. How would this affect the...
A. Problems (mandatory) 1. The inflation rate in the US is 6% and in Japan it is 11%. If you know that the spot exchange rate is 100 yen equals $1, what will the expected spot rate be in a year from now? If there is exactness in the inflation differential and the exchange rate differential? Use yen terms. That is, yen 100/1 dollar, or 100yen=$1.
If market considers that Mexico expected inflation rate next year is 3% higher than expected US inflation rate what would be the impact on relative interest rates in the two countries? Is it going to impact the interest rates now or next year?
Assume inflation is greater in the EU than in Canada. How will that affect the exchange rate e=$CAD/Euro? Use a graph, a formula, and an explanation.
Problem 2.(35 points) Suppose that the current Japan/US exchange rate is Eyys - 120, while the current Japan/Euro exchange rate is Eyje = 130 and the Euro/US exchange rate is Ee/s-0.7. Suppose your bank can exchange dollars, yen and euros freely and without extra charge at the current exchange rate. Now consider the following scheme. 1. Suppose you take out $100 from your savings account and convert them into yen at the current exchange rate. How many yen would you...
1. Suppose an economy is experiencing higher inflation rate as well as a recessionary gap. Using the policy reaction function, explain whether the Reserve bank will increase or decrease the interest rate? 2. Explain the effect of an increase in imports on the equilibrium output and inflation in the AD-AS model. Carefully distinguish between the short run and the long run. Would this affect the potential output? Why/Why not? 3. Suppose capital in Country A increases from 100 in 2017...
How does higher expected inflation affect the required rate of return (ROR)? Causes the ROR to decrease Does not have an effect on the ROR Causes the ROR to increase
1. Suppose an economy is experiencing higher inflation rate as well as a recessionary gap. Using the policy reaction function, explain whether the Reserve bank will increase or decrease the interest rate? 2. Explain thee effect of an increase in imports on the equilibrium output and inflation in the AD-AS model. Carefully distinguish between the short run and the long run Would this affect the potential output? Why/Why not? 3. Suppose capital in Country A increases from 100 in 2017...
QUESTION 12 Suppose that Japan’s Central Bank announces it wants to target an inflation rate of at least 2%, and that real GDP growth in the economy is 1%. Assume that velocity is constant. Then money growth must be at least 4% 2% None of the above/below 3% 1% QUESTION 13 Suppose we construct the CPI and the GDP deflator using the same type of goods. Which of the following is true: The CPI and GDP deflator may both overstate...
discussion how inflation or exchange rate movements affect the accounting industry.
How would rapid inflation in Canada affect U.S. tourism travel to Canada? Does it make any difference whether the exchange rate between Canadian and U.S. dollars is fixed or flexible? Please make answer able to copy Thank you.