QUESTIONS AND APPLICATIONS 1. Percentage Depreciation Assume the spot rate of the British pound is $1.73. The expected spot rate percentage depreciation does this reflect? 2. Inflation Effects on Exchange Rates Assume ec 8. to eu 9. th 1 year from now is assumed to be $1.66. What that the U.S. inflation rate becomes high relative to Canadian inflation. Other things being equal, how should this affect the (a) U.S. demand for Canadian dollars, (b) supply of Canadian dollars for sale, and de (c) equilibrium value of the Canadian dollar? ir 3. Interest Rate Effects on Exchange Rates Assume U. S. interest rates fall relative to British interest tes. Other things being equal, how should this affectes pounds for sale, and (c) equilibrium value of the pound? 1 t the U.S. income level rises at a much higher rate a for Canadian dollars, (b) supply of Canadian dollars fora 5. Trade Restriction Effects on Exchange Ratest the (a) U.S. demand for British pounds, (b) supply of 4. Income Effects on Exchange Rates Assume than does the Canadian income level. Other things tha being equal, how should this affect the (a) U.S. demand sale, and (c) equilibrium value of the Canadian dollar? Assume that the Japanese government relaxes its con- trols on imports by Japanese companies. Other things being equal, how should this affect the (a) U.S. demand for Japanese yen, (b) supply of yen for sale, and (c) equilibrium value of the yen