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| What effect, if any, does each of the following shocks (only consider the initial effect) have on Japan’s real risk-free interest rate? Briefly explain and use supply and demand curves to support your conclusions. Make sure that you label all axes and curves. a. A decrease in the Japanese money supply with no change in prices b. A decrease in global lending to Japan c. An increase in real private saving in Japan d. An increase in the Japanese government’s budget deficit e. Speculative short-term international capital inflows to Japan f. An increase in Japan’s real GDP g. A rise in Japan’s expected inflation rate |
