Assume that the United States invests heavily in government and corporate securities of South Korea (hereafter,...

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Assume that the United States invests heavily in government andcorporate securities of South Korea (hereafter, ‘Korea’). Inaddition, residents of Korea invest heavily in the United States.Approximately $20 billion worth of investment transactions occurbetween these two countries each year. The total dollar value oftrade transactions per year is about $15 million. This informationis expected to also hold in the future.
Explain how each of the following conditions will affect the valueof Korean currency, won, holding other things equal.
a) U.S. inflation has suddenly increased substantially, whileKorean inflation remains low.
b)U.S. interest rates have increased substantially, while Koreaninterest rates remain low. Investors of both countries areattracted to high interest rates.
c) The U.S. income level increased substantially, while Koreanincome level has remained unchanged
d) The U.S. is expected to impose a small tariff on goods importedfrom Korea.
e) Combine all expected impacts to develop an overall forecast.

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Assume that the United States invests heavily in government andcorporate securities of South Korea (hereafter, ‘Korea’). Inaddition, residents of Korea invest heavily in the United States.Approximately $20 billion worth of investment transactions occurbetween these two countries each year. The total dollar value oftrade transactions per year is about $15 million. This informationis expected to also hold in the future.Explain how each of the following conditions will affect the valueof Korean currency, won, holding other things equal.a) U.S. inflation has suddenly increased substantially, whileKorean inflation remains low.b)U.S. interest rates have increased substantially, while Koreaninterest rates remain low. Investors of both countries areattracted to high interest rates.c) The U.S. income level increased substantially, while Koreanincome level has remained unchangedd) The U.S. is expected to impose a small tariff on goods importedfrom Korea.e) Combine all expected impacts to develop an overall forecast.