Question

Using Demand and Supply Analysis. Use the line drawing tool to show the effects of an increase in Japanese interest rates on the exchange rate between the British pound and the Japanese yen. The Market for Pounds Yen per Pound O o The vertical axis will be yen per pound, 7 Draw and properly label a single line. Carefully follow the instructions above, and only draw the required object. Pounds

Answer 1

Increase in Japanese interst rate attracts UK resident to invest more in Japanese financial assest. As they start investing mire in Japanese financial Market , relative demand for Japanese currency,yen, Increases and relative demand of pounds decreases { Japanese resident are no longer interested in investing in UK financial market,so pound demand falls}. So as demand of pound falls, demand curve shifts left side,and equilibrium exchange rate decreases.it means yen is relatively expensive in terms of pounds.

Supply (pounds Initial Demand - New Dern and lfoncel) sounds Market for pounds