Reference no: EM133504356

For the graphs, be certain to accurately label all axes, curves, and points as appropriate. Show your work for any calculations.

Question 1: Draw the foreign exchange market showing the yen-price for Indian rupees. Label the equilibrium exchange rate (e1), the equilibrium quantity (Q1), and the current exchange rate (ec). Assume that there is a surplus of the rupee at the current rate. (note: make sure to show the disequilibrium state described in the scenario.)

Question 2: Assume the current exchange rate for the British pound in terms of the Canadian dollar is $0.50 per pound. Based on this information, draw the foreign exchange market for Canadian dollars. Assume the market is in equilibrium. (note: The question has given you CAD per GBP, you need to convert it to Pounds per Canadian dollar.)

Japan and Australia are trading partners. Japan uses the yen for its currency and Australia uses the Australian dollar.

Question 3: Using side-by-side graphs of the exchange market for the yen (¥) and the Australian dollar (A$), show the impact of a decrease in the demand for yen.

Question 4: Based on the change indicated in part (c), is the Australian dollar appreciating or depreciating?

Question 5: If Japan began with a current account balance of zero, will the change in part (c) result in a current account surplus, deficit, or no change? Explain.

Question 6: Based on your answer to part (e), what must be the change to the capital and financial account of Japan? (note: Remember that when dealing with the balance of payments between two countries the two accounts need to equal zero. So according to the change you identified in E, your answer here needs to be the opposite.)

Question 7: Assume the final exchange rate for the Australian dollar is ¥50. Calculate the exchange rate for the yen in terms of the Australian dollar.

Question 8: Assuming efficient production and mutually beneficial trade, where would consumption for the Australia and Japan be relative to their respective production possibility curves-inside, on, or beyond the PPCs? Explain. (note: The question is about consumption.)