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Assume the US is a small open economy and its trading partner is Japan. The trade balance is initially zero. Assume Japanese goods suddenly become

Assume the US is a small open economy and its trading partner is Japan. The trade balance is initially zero.

Assume Japanese goods suddenly become wildly popular in the U.S. Answer question 2. [2] (a) What would happen to US. net exports curve as a function of the real exchange rate? Explain. (b) What happens to the equilibrium nominal exchange rate (the Yen price of a dollar)? Answer by showing and explaining the effect on the market for foreign exchange. What happens to demand for US. dollars inthe market n foreign emency. P[SI]

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