4. In your macroeconomic lectures you are often told that exchange rates and interest rates are important for macroeconomic decision-making. a. How does an increase in Japan’s government budget deficit affect each of the following? i. The real interest rate in the short run in Japan. Explain.  ii. Private domestic investment in plant and equipment in Japan.

n chapter 11, "International Economics," of Naked Economics, Charles Wheelan discusses international exchange rates, how these are determined, and how exchange rates impact the economy. Of the statements below, Wheelan includes all of them in his discussion of the value of the British pound (the Briish currency) in 1992, EXCEPT for this one. Which of the below statements does the NE chapter on "International Economics" NOT include? (What does this chapter NOT say?)  Group of answer choices   The international exchange rate for the British pound (or any other currency) in the international exchange rates market is determined by demand for that currency relative to its supply.   By increasing real interest rates to prop up the British pounds the British government would also be boosting the British economy which was in a state of economic recession at that time.   To prop up (increase) the exchange rate for the British pound the British government could use monetary policy and increase…

The figure to the right shows the market for Kuwait's currency, the dinar. Suppose that the following two events take place in the market for the dinar: The U.S. demand for oil, Kuwait's main export good, declines and market interest rates on financial assets denominated in dinar decrease relative to U.S. interest rates. Moreover, assume that exchange rates are flexible. Using the line drawing tool, show how the market for the dinar is impacted by these events Properly label this line, Carefully follow the instructions above, and only draw the required objects. According to your graph, the dinar has with respect to the dollar. Dollars per Dinar 6.0 5.5 5.0 4.5 4.0 3.5- 3.0 2.5 2.0 1.5- 1.0 0.5- 0.0+ 0 1 2 6 Quantity of Dinars (billions) 8 9 D S 10 Ly