The graph below shows the foreign exchange market between the United States and

Question

The graph below shows the foreign exchange market between the United States and Japan before and after an increase in the demand for Japanese goods by U.S. consumers.

A. If the exchange rate was free-floating prior to the change in demand for Japanese goods, what was its value in yen per dollar?

B. After the change in demand, assuming a free-floating exchange rate, what is the new exchange rate in yen per dollar?

C. If the Japanese central bank wanted to keep the exchange rate fixed at its initial value, how many dollars would it have to buy?

Explanation / Answer

Question A). Answer :- Yen per dollar = 125.

Question B). Answer :- Yen per dollar = 100.

Question C). Answer :- Dollars needed to buy in the given question = (1 / 100) -  (1 / 125)

= 0.01 - 0.008

= 0.002

Conclusion :- Dollars needed to buy in the given question = 0.002

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.