Refer to following table, in whichQ_d is the quantity of yen demanded,P is the dollar price of yen,Q_s is the quantity of yen supplied in year 1, andQ_s' is the quantity of yen supplied in year 2. All quantities are in billions and the dollar-yen exchange rate is fully flexible. 

a. What is the equilibrium dollar price of yen in year 1?

b. What is the equilibrium dollar price of yen in year 2?

c. Did the yen appreciate or did it depreciate relative to the dollar between years 1 and 2?

d. Did the dollar appreciate or did it depreciate relative to the yen between years 1 and 2?

e. Which one of the following could have caused the change in relative values of the dollar and yen between years 1 and 2: 

(1) More rapid inflation in the United States than in Japan; (2) an increase in the real interest rate in the United States but not in Japan; (3) faster growth of income in the United States than in Japan. 

Transcribed Image Text:

Qd Q,' 30 10 125 20 15 120 25 15 20 115 20 25 110 15