Suppose n countries with high interest rates such as Australia. Would you expect
ID: 1129960 • Letter: S
Question
Suppose n countries with high interest rates such as Australia. Would you expect thls that you follow the strategy set out in b. for six months. You borrow in to vield high gSuppose urns? strat5 The Japanese interest rate is one percent while it is six percent in turn of ten percent. Did the Australian exchange rate appreciate or Japan and invest in Au Australia. You make a return of te depreciate ad s this strategy likely to work over the long run? the model of long run exchange rate determination developed in class. model applied to the long run. It assumed prices were flexible and income is fixed. 3. at the there are two countries, the US and Europe. There is no expectation of price Remember, stability. Determine the effects of the following events on the US exchange rate with Europe. Europe increases its money supply by twenty percent. There is economic growth of ten percent in the US. At tbe same time, the US a. h eases the money supply by twenty percent. Credit cards are legalized in Europe. Previously they were illegal. dant nan- The US government reduces the government deficit by increasing taxes C. d. 13 ano PonExplanation / Answer
The correct answer is option A
The correct answer is option C
The correct answer is option B
The correct answer is option D