for Topic 4 (1)-FX market 1 .An increase in productivity in China causes income in China to rise substantially. Will Japanese yen depreciate or appreciate against Chinese yuan if it is in a flexible exchange rate regime? Explain your answer by drawing a diagram about exchange rate determination. 2 Please explain what saying that a currency is overvalued means. Why is an overvalued currency a problem? 3 Over the past five years, the exchange rate between British pound and U.S. dollar, $/E, has changed from about 1.90 to about 1.45. Would you agree that over this five-year period that British goods have become cheaper for buyers in the United States