The demand for U.S.-made cars in Japan is given by Japanese demand 5 10,000 2 0.001(Price of U.S. cars in yen).

Similarly, the demand for Japanese-made cars in the United States is U.S. demand 5 30,000 2 0.2(Price of Japanese cars in dollars).

The domestic price of a U.S.-made car is $20,000, and the domestic price of a Japanese-made car is

¥2,500,000. From the perspective of the United States, find the real exchange rate in terms of cars and net exports of cars to Japan, if: (LO1)

a. The nominal exchange rate is 100 yen per dollar.

b. The nominal exchange rate is 125 yen per dollar.

How does an appreciation of the dollar affect U.S. net exports of automobiles (considering only the Japanese market)?