Under a system of fixed exchange rates where the foreign exchange market is in equilibrium and neither country has a balance-of-payments deficit or surplus,an increase in imports of French goods by Japanese consumers,ceteris paribus,would result in a

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Quizplus · Accepted Answer

C) An increase in imports of French goods by Japanese consumers would lead to an outflow of currency from Japan to France to pay for these imports, ceteris paribus. This would result in a balance-of-payments deficit for Japan, as more money is leaving the country than coming in from the trade of goods and services.

Under a System of Fixed Exchange Rates Where the Foreign