Question

In: Economics

Q1. What would happen to relative value of US dollar and Japanese yen if Japan raises...

Q1. What would happen to relative value of US dollar and Japanese yen if Japan raises its interest rate? Explain the process.

Q2. A Japan-made flash driver is sold at ¥ 10,000 in Japan and sold at $100 in the US market. A US-made flash driver is sold at $100 in the US and ¥ 10,000 in Japanese market now. What would happen to the price of imports and exports in Japan and the US if Japan declares 10% revaluation of Japanese yen? What would happen to the trade between two countries? Explain it.

Solutions

Expert Solution

Answer;

Q1. What would happen to relative value of US dollar and Japanese yen if Japan raises its interest rate? Explain the process.

If Japan increases its interest rate before the relative value of dollar in US will change to depreciate relative to yen and here will be outflows of capital after US to Japan as per there is high interest rates in Japan.

The US Doller will be converted into Yen the financial assets will be debited in US and become credited in Japan

Q2. A Japan-made flash driver is sold at ¥ 10,000 in Japan and sold at $100 in the US market. A US-made flash driver is sold at $100 in the US and ¥ 10,000 in Japanese market now. What would happen to the price of imports and exports in Japan and the US if Japan declares 10% revaluation of Japanese yen? What would happen to the trade between two countries? Explain it.

  • Earlier revaluation in Japanese Yen
  • Flash Drive selling price in Japan selling price in USA
  • Japan made flash drive 10,000 yen 100 USD
  • US made flash drive 10,000 Yen 100 USD
  • Afterwards revaluation of Japanese Yen at 10% now the flash drive price developed Flash Drive selling price in Japan selling price in USA
  • Japan made flash drive 10,000 yen 110 USD
  • US made flash drive 9,000 Yen 100 USD
  • After there is a revaluation of Japanese yen thus the product made by japan is more dearer then the product made by USA. now the same product will cost 110USD for US customer.
  • In this case people will be more incline toward import as they find US flash drive is cheaper then Japanese flash drive is 9,000 where their own country product is more costlier.
  • Laterally with the price revaluation the country have to charge its own product price or else the import will be more and export will be less.

Rahul Sunny answered 7 months ago
Next > < Previous

Related Solutions

Suppose that the Japanese yen depreciates relative to the U.S. dollar. How does this affect the...
Suppose that the Japanese yen depreciates relative to the U.S. dollar. How does this affect the competitiveness of both Ford and Honda in both the U.S. and Japanese markets? Create a numeric example to show how Honda could reduce the dollar price of cars sold in the U.S. and still earn more yen per car compared with the stronger yen and higher dollar price
What will happen to the value of the dollar if U.S. interests rates increase relative to...
What will happen to the value of the dollar if U.S. interests rates increase relative to interst rates in the rest of the world? Question 33 options: the dollar will appreciate and U.S. exports will become more expensive the dollar will appreciate and U.S. exports will become less expensive the dollar will depreciate and U.S. exports will become more expensive the dollar will depreciate and U.S. exports will become less expensive
After global financial crises, US dollar deprecated against the Japanese Yen significantly, from 1 $ =...
After global financial crises, US dollar deprecated against the Japanese Yen significantly, from 1 $ = 110 Yen to 1 $ = 75 Yen. It is argued that different monetary policies between US Fed and Bank of Japan triggered the depreciation of dollar. Specifically, the Fed adopted quantitative easing while Bank of Japan maintained a relatively stable money supply. Please use asset approach to explain the depreciation of dollar. Draw two figures – equilibrium of money market and that of...
Momomo is a construction company in Japan. Momomo is concerned on the depreciation of Japanese Yen...
Momomo is a construction company in Japan. Momomo is concerned on the depreciation of Japanese Yen in the future. The company expected to pay its supplier EUR 950,000 in Germany in three months. At the same time, Momomo is expected to receive a payment of USD1,500,000 from its customer, three months from now. The cost of capital for Momomo is 7.5%. The current spot rate is at JPY 109/USD and JPY120/EUR The following information was given by Momomo’s bank. Exercise...
Momomo is a construction company in Japan. Momomo is concerned on the depreciation of Japanese Yen...
Momomo is a construction company in Japan. Momomo is concerned on the depreciation of Japanese Yen in the future. The company expected to pay its supplier EUR 950,000 in Germany in three months. At the same time, Momomo is expected to receive a payment of USD1,500,000 from its customer, three months from now. The cost of capital for Sakura is 7.5%. The current spot rate is at JPY 109/USD and JPY120/EUR The following information was given by Momomo’s bank. Exercise...
The following are daily exchange rates with the Japanese Yen quoted in Yen/Dollar. Date Yen/Dollars 19-Apr-13...
The following are daily exchange rates with the Japanese Yen quoted in Yen/Dollar. Date Yen/Dollars 19-Apr-13 99.28 18-Apr-13 98.22 17-Apr-13 97.74 16-Apr-13 97.86 15-Apr-13 98 12-Apr-13 98.98 11-Apr-13 99.42 10-Apr-13 99.61 9-Apr-13 99.02 8-Apr-13 98.9 5-Apr-13 96.86 4-Apr-13 96.12 3-Apr-13 92.96 2-Apr-13 93.43 1-Apr-13 93.3 29-Mar-13 94.16 28-Mar-13 94.02 27-Mar-13 94.38 26-Mar-13 94.22 25-Mar-13 94.34 22-Mar-13 94.48 21-Mar-13 95.06 20-Mar-13 95.51 19-Mar-13 94.85 18-Mar-13 94.92 15-Mar-13 95.26 14-Mar-13 96.16 13-Mar-13 96 12-Mar-13 95.96 11-Mar-13 96.12 8-Mar-13 96 7-Mar-13 95 6-Mar-13...
The spot rate of Japanese Yen is 105 Yen per dollar. After one year spot rate...
The spot rate of Japanese Yen is 105 Yen per dollar. After one year spot rate will be is 115 Yen per dollar. If you deposit 1000000 yen in one year saving account with 5% interest rate what will be the dollar rate of return on deposit. Is there a interest parity between Yen and dollar deposit?
Q1. According to the Wall Street Journal, the value of U. S. dollar relative to the...
Q1. According to the Wall Street Journal, the value of U. S. dollar relative to the value of foreign currencies has significantly risen since the last election. Assuming that the economy is currently in the long-run macroeconomic equilibrium, use the AD-AS model and analyze how an increase in the value of U.S. dollar will affect the U.S. economy. In each case, be sure to label the initial equilibrium and new equilibrium including the equilibrium price and equilibrium GDP. 1. Draw...
Q1. According to the Wall Street Journal, the value of U. S. dollar relative to the...
Q1. According to the Wall Street Journal, the value of U. S. dollar relative to the value of foreign currencies has significantly risen since the last election. Assuming that the economy is currently in the long-run macroeconomic equilibrium, use the AD-AS model and analyze how an increase in the value of U.S. dollar will affect the U.S. economy.   In each case, be sure to label the initial equilibrium and new equilibrium including the equilibrium price and equilibrium GDP. Draw a...
What has been called "Abenomics" involved monetary policies designed to reduce the value of the Japanese Yen relative to other currencies. In the context of trade, what effect do you think this would have on the local Japanese economy?
  In 2012, Shinzo Abe became prime minister of Japan, promising bold policies to improve Japan's economy. What has been called "Abenomics" involved monetary policies designed to reduce the value of the Japanese Yen relative to other currencies. In the context of trade, what effect do you think this would have on the local Japanese economy? Since his election victory, President Donald Trump has been a vocal advocate of lowering interest rates, which the Federal Reserve has done on several...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT