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Question: 1. The United States presently has a current account deficit with Japan. What would happen to the dollar/yen spot exchange rate and the current account deficit if there were a decrease in Japanese investment in the United States? Incorporate the foreign exchange market into your answer.
2. Suppose that you observe the following exchange rates: $2/£; $0.0075/¥; and £0.005/¥. Is there cross-rate equality? If yes, why? If not, what would you expect to happen?
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suppose an inflationary economy can be described by the following equations representing the goods and money markets
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