Consider two countries with friendly trade relations, South Korea and Australia. Suppose that the real interest rate in South Korea increases relative to Australia. Show how the change in the real interest rate affects the equilibrium exchange rate by shifting one or both of the curves on the graph. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther. EXCHANGE RATE (wones per dollar) Supply Demand QUANTITY (Millions of dollars) As a result of the change in the real interest rate, the South Korean won Demand Supply ? in value relative to the Australian dollar.

Consider two countries with friendly trade relations, South Korea and Australia. Suppose that the real interest rate in South Korea increases relative to Australia. Show how the change in the real interest rate affects the equilibrium exchange rate by shifting one or both of the curves on the graph. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther. EXCHANGE RATE (wones per dollar) Supply Demand QUANTITY (Millions of dollars) As a result of the change in the real interest rate, the South Korean won Demand Supply ? in value relative to the Australian dollar.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter29: International Finance

Section: Chapter Questions

Problem 8P

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