The following questions focus on the exchange rate between the euro and the South Korean won. Assume the exchange rate is flexible. The exchange rate is defined as the number of euros you must pay for one won. Suppose a recession in the euro zone causes European incomes to decrease, while incomes in South Korea remain the same. Shift the appropriate curve or curves on the following graph to illustrate how this affects the market for South Korean won if all other things remain equal. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther, Supply of Won Demand for Won Supply of Won PRICE (Euros per won) Demand for Won QUANTITY OF WON The decrease in European Incomes causes the South Korean won to relative to the South Korean won. relative to the euro and causes the euro to Suppose the price level in the euro zone rises by 5%, while the price level in South Korea remains the same. That is, the inflation rate in the euro zone is higher than in South Korea. Drag the appropriate curve or curves on the following graph to illustrate how this affects the market for South Korean won. Supply of Won Demand for Won Supply of Won PRICE (Euros per won) Demand for Won QUANTITY OF WON Suppose the real interest rates in the euro zone and South Korea are initially the same. Then the real interest rate in South Korea falls, while the real interest rate in the euro zone remains the same. This will cause the supply of won to and the demand for won to which causes the euro to relative to the South Korean won.