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Consider two countries, Japan and Korea. Japan experienced relatively slow output growth (2%), whereas Korea had relatively robust output growth (7%). Suppose the Bank of Japan allowed the money supply to grow by 3% each year, whereas the Bank of Korea chose to maintain relatively high money growth of 15% per year
For the following questions, use the simple monetary model (where L is constant). You will find it easiest to treat Korea as the home country and Japan as the foreign country.
a) What is the inflation rate in Korea and in Japan?
b) What is the expected rate of depreciation in the Korean won relative to the Japanese yen?
c) Suppose the Bank of Korea decreases the money growth rate from 15% to 12%. If nothing in Japan changes, what is the new inflation rate in Korea?
d) Suppose the Bank of Korea sought to implement policy that would cause the Korean won to appreciate relative to the Japanese yen. What ranges of the money growth rate (assumingpositive values) would allow the Bank of Korea to achieve this objective?
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Anyone can hep to make recommendations for improvement DET Diversity Policy.
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Which generation does not know a physical mailbox exists?
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