1a. If a panic causes Indian depositors to withdraw their money from Japanese ba

Q: 1a. If a panic causes Indian depositors to withdraw their money from Japanese ba

First question is answered below 1. Correct option: (c) Increased Reason: Increased supply of yen will shift supply curve of yen to the right, leading to depreciation of yen.

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Question

1a. If a panic causes Indian depositors to withdraw their money from Japanese banks, it would cause the Japanese Yen to depreciate, since the supply of Yen has________

a. Not changed

b. Decreased

c. Increased

d. None of the above

1b. In the case where interest rates are lower in Japan, which of the following is an example of a “carry trade”

a. Increase borrowing in the US, convert to Yuan and invest in financial assets in Japan

b. Increase borrowing in Japan and invest in Japan

c. Increase borrowing in Japan, convert to Dollars and invest in the US

d. Increase borrowing in the US and invest in the US

Explanation / Answer

First question is answered below

Correct option: (c) Increased

Reason: Increased supply of yen will shift supply curve of yen to the right, leading to depreciation of yen.

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1a. If a panic causes Indian depositors to withdraw their money from Japanese ba

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