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Use the short-run model of the nominal exchange rate to explain what would happen today to the yen per $US exchange rate if the following occurred. Explain your reasoning as well as indicating what would happen in the model.
a. The central bank of Japan raises interest rates in Japan but the Fed maintains interest rates in the U.S.
b. An event occurs today in the U.S. that lowers the expected exchange rate one-year from now.
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