Because of the United States' long-standing trade deficit with Japan,the supply of U.S.dollars in Japan has increased.Which of the following is true about this situation?

Question

Quizplus · Accepted Answer

An increase in the supply of U.S. dollars in Japan will lead to a decrease in the value of the dollar relative to the yen, ceteris paribus. This will result in Japanese goods becoming more expensive for U.S. consumers, therefore reducing the demand for Japanese imports and potentially reducing the trade deficit. Trade restrictions may not be the only way to address the trade deficit as currency exchange rates can also play a significant role. Option C is also incorrect as it assumes a linear relationship between economic strength and trade deficit, which may not always be the case.

Because of the United States' Long-Standing Trade Deficit with Japan,the