HOMEWORK 2

1) a. Demand of francs increased so the spot value of francs will appreciate against
Dollar.

b. Demand of Dollar rose that make the spot price of Dollar appreciate against francs.

c. In this situation, it won’t effect to the spot value but will affect to the future price
which will make the future price of Dollar rises as the demand of Dollar increased.

3) a. Higher growth rate will increased demand for Dollars => Dollar appreciate.

b. Higher inflation in US will reduce the value of Dollars => Dollar depreciate.

c. Price of US goods rise at the same rate of price of Japan goods so it won’t effect the
exchange rate => Exchange rate remain the same.

d. Real interest rate of US rise relative to Japan make Dollar become more attractive
to foreigners to invest in it => Dollar appreciate against Japanese Yen.

e. New restrictions make Dollar less attractive to foreigners => Dollar depreciate
against Japanese Yen.

f. Wage of US rises relative to wage of Japan and US productivity falls behind Japan
will lead to the same result: Price of goods increase -> Demand for US goods
decrease ->Demand for Dollar decrease so Dollar depreciate against Yen.

4) An Easier Monetary Policy – this mean Fed will give a lower interest rate to make
money flow between banks more easily, banks have more money than needed to
invest. And lower interest rates will attract less capital and lead to the value of the
Dollar depreciate.

7) a. Ease Monetary Policy will make inflation decrease and then this will attract more
inflows and increase value of the Dollar.

b. Yes, he can use the Tightening Monetary Policy will rise the real interest to make
the Dollar become more attractive to foreigners => Dollar appreciate by the way this
may lead the inflation more and more higher than before.