1. Depict Two currency markets graphs: the Japanese Yen and the U.S. Dollar, setting up the...

1. Depict Two currency markets graphs: the Japanese Yen and the U.S. Dollar, setting up the two markets in initial equilibrium. Next to the supply curve and the demand curve state who is on the supply curve in each market and who is on the demand curve in each market.

2. Assume there is an increased preference among U.S. consumers for Japanese electronic goods because of a perceived superior quality. Copy number 1 graphs and reflecting this change. MAKE THEM SEPARATE FROM NUMBER 1.

Expert Solution

1. In the given figure, graph on left hand side indicate the demand and supply of Japanese currency by US. On the other hand, the graph on the right hand side indicate the demand and supply of US currency.

2. The increased demand for Japanese products means that imports of US will rise. Thus, they are demnding more of Japanese currency to pay for the imports. This implies that the demand curve of demand of Japanese currency by US will shift to the right.

On the other hand, more exports by Japan would imply more supply of foreign exchange in Japan. Thus, the supply of US currency curve in Japan will shift to the right.

Rahul Sunny answered 8 months ago

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