Question 1 The graph below provides the demand for and supply of U.S. Dollars. The exchange rate (or alternatively, the price of a U.S. Dollar) is denominated in Japanese Yen (*). Y145 Supply Exchange Rate (#/$) 4140 V135 V130 V125 *120 *115 Demand 12 24 36 48 60 72 Quantity of Dollars (billions) Part (i): What is the equilibrium value of $1 in terms of Japanese Yen? Part (ii): How many U.S. Dollars does it cost to purchase *1? Part (iii): Suppose that an increase in the U.S. real interest rate increases the demand for U.S. Dollars by $12 billion at each exchange rate. Identify the new equilibrium exchange rate for the U.S. Dollar. Has the U.S. Dollar appreciated or depreciated in response to the rise in the U.S. real interest rate? Part (iv): Suppose that an increase in the U.S. real interest rate increases the demand for U.S. Dollars by $12 billion at each exchange rate. Identify the new equilibrium exchange rate for the Japanese Yen. Has the Japanese Yen appreciated or depreciated in response to the rise in the U.S. real interest rate