Suppose that Japan (country a) and China

Question
Suppose that Japan (country a) and China (country b) do not have foreign currency controls in effect. The total demand for money is always 2,000 goods in Japan and 1,000 goods in China. The fiat money supplies are 100 yen in Japan and 300 RM Bin China.(a) Find the value of each country’s money if the exchange rate etis 3. Do the same if et = 1. Is one exchange rate more likely than the other? Explain.(b) Suppose the exchange rate is 3 and China triples its fiat money stock, whereas Japan prints no new money. How many goods will China gain in seignior age? What fraction of this seignior age comes from Japanese citizens?

Originally posted 2016-11-10 17:35:17. Republished by Blog Post Promoter

Suppose That Japan (Country A) And China

Suppose that Japan (country a) and China (country b) do not have foreign currency controls in effect. The total demand for money is always 2,000 goods in Japan and 1,000 goods in China. The fiat money supplies are 100 yen in Japan and 300 RM Bin China. (a) Find the value of each country’s money if the exchange rate etis 3. Do the same if et = 1. Is one exchange rate more likely than the other? Explain. (b) Suppose the exchange rate is 3 and China triples its fiat money stock, whereas Japan prints no new money. How many goods will China gain in seignior age? What fraction of this seignior age comes from Japanese citizens?