We start with a 3 percent real interest rate in the United States and in Japan.Next,the real interest rate in Japan falls to 2 percent,and the U.S.real interest remains constant.As a result,

Question

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A decrease in the real interest rate in Japan relative to the U.S. will increase the supply of yen and decrease the demand for dollars, leading to a depreciation of the yen and an appreciation of the dollar.

We Start with a 3 Percent Real Interest Rate in the United