Explain the impact of an increase in the risk premium

Reference no: EM131938501

Question: Assume a world with two countries, Japan and the US, that adhere to the Gold Standard. Due to the high government debt in Japan, financial markets consider the Japanese debt to have become unsustainable in the long run. They demand a higher risk premium.

Explain the impact of an increase in the risk premium on the money supply in Japan and the money supply in the US.

Reference no: EM131938501

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