Assume that the exchange rates are free to vary

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Reference no: EM131323028

Daniel Wiener is trying to understand the factors that cause exchange rates to change. For each of the following scenarios, say whether the value of the dollar will appreciate, depreciate, or remain the same relative to the Japanese yen. Explain each answer. Assume that the exchange rates are free to vary and that other factors are held constant.

1. The growth rate of national income is higher in Japan than in the United States

2. U.S. wages rise relative to Japanese wages, while American productivity falls behind Japanese productivity

3. Prices in Japan and United States are rising at the same rate

4. Real interest rates are higher in Japan than in the United States

5. Japan imposes import duties on goods imported from the U.S. and U.S. does not retaliate.

Reference no: EM131323028

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