Which of the following figures shows the correct shift in the market for the Japanese yen if Japanese interest rates decrease?

Question

Quizplus · Accepted Answer

A decrease in Japanese interest rates will decrease the demand for the yen and increase the supply of the yen. This will lead to a shift in the market for the yen to the right, as shown in figure C. In this figure, the exchange rate for the yen has depreciated, and the quantity of yen traded has increased. Option A shows a shift to the left, which would imply an increase in Japanese interest rates. Option B shows no shift in the market for the yen. Option D shows a shift to the right, but with an appreciation of the yen instead of depreciation, which is not consistent with a decrease in Japanese interest rates.

Which of the Following Figures Shows the Correct Shift in the Market