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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.

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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 1 week ago
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