krisha900Lv1

8 Apr 2023

Question 1 

 The United States and South Korea are trading partners, and the United States has a zero current account balance. 

Assume now that the inflation rate in the United States decreases relative to the inflation rate in South Korea. 

1. Based on the decrease in the inflation rate in the United States, will United States exports to South Korea increase or decrease? 
2.  Based on the change in United States exports in part (a), answer each of the following. 

1. Will the United States current account balance remain at zero, be in surplus, or be in deficit? 
2. What will happen to real gross domestic product in the United States in the short run? Explain. 

1. The South Korean currency is the won. Draw a correctly labeled graph of the foreign exchange market for the United States dollar. Show the effect of the lower inflation rate in the United States on the won price per United States dollar.