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I attached screenshot of a 7 part question please answer all parts of the question Japan has a large stock ofgovernment debt and has been

I attached screenshot of a 7 part question please answer all parts of the question

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Japan has a large stock ofgovernment debt and has been at the zero lower bound many years al'ter 2008. Suppose that, for whatever reason, international investors become less willing to hoIdJapanese government bonds and other yendenominated assets. In other words. suppose there is an autonomous decrease in the demand for yendenominated assets. Analyze the effects of this change to thejapanese economy and the answer the questions asked. (Note: This Problem (Part IV) consists of 7 parts (questions), please followdle Instructions provided and answer them carefully.) 'I i In the graph below. supply and demand curves are drew for assets denominated injapanese yeni The variable E is the exchange rate from thejapanese point of view. that is. the number of US dollars that you can buy with onejapanese yen. Please analyze why the supply curve of yen-dominated asset is vertical. Exchange rate, E S (dollars ) yen 2) What comets) would be affected in the graph above when there is an autonomous decrease \ the demand for yendenominated assets? S Exchange raie, E (dollars ) yen Quantity of yen- denominated assets Exchange rate, E (dollars ) yen Quantity of yen A1 denominated assets 3) Based on your answer in part 2}, the new equilibrium has asset : than {as} A1 and exchange rate : than (as) E. (Fill the blanks with lower, higher or same] C] Mark for Review What's This? Exchange rate, E S dollars yen E1 D > Quantity of yen- A1 denominated assets 4) Issuance of currency is partially backed with US dollar dominated asset. Following part 3), if Bank of Japan (BOJ, central bank of Japan) is holding US dollar- dominated asset and tries to stabilize exchange rate between Japanese Yen and US dollar, JOB's target should be to (increase, decrease or unchange) exchange rate. Mark for Review What's This?dollars yen E1 D > Quantity of yen- A1 denominated assets 5) This question follows part 4). JOB can achieve its target by shifting (D or S) to (right or left). Mark for Review What's This?6) Based on your answer in part 4) and 5), please briefly explain how would JOB achieve its target with dollar-dominated asset. (Write down the short answer first, and briefly analyze your result) Exchange rate, E S dollars yen E1 D > Quantity of yen-7) Now consider the effects of the change in E within the AD/AS model. Before the change in the exchange rate, the Japanese economy is at point 2 in the figure below. What happens in this diagram as a result of the change in the exchange rate from your answer in part 2) and 3) above? Which curve(s) would be shift, and to which direction? Hint: start with changes in real interest rate and output. (Note: Please write down your answers to the questions asked above first and then briefly analyze your answers) LRAS TL AD AS 2 It 2 7 Y Y2 YP

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