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effects on the exchange rate between the British pound and the Japanese yen

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Using demand and supply analysis, answer the following questions. What are the effects on the exchange rate between the British pound and the Japanese yen from:
a. An increase in Japanese interest rates
b. An increase in the price of British goods
c. An increase in British interest rates

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Solution Preview

For all the questions see the attached graphs.

The exchange rate between the British Pound and Japanese Yen is dependent on a number of factors, some of the most important of which are the ones you have mentioned in the questions here: changes in interest rates in the two economies and changes in price of goods. Suppose you get X Japanese Yen for each British Pound. Then if the economic change increases X I say that the exchange rate has risen, and if X falls then I say the exchange rate has fallen.

a. When Japanese interest rates go up it is beneficial to hold ...

Solution Summary

The effects on the exchange rate between the British pound and the Japanese yen are emphasized.

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