Given floating exchange rates, if Japan increases its demand for Canadian goods at the same time that Canada increases its demand for Japanese goods, then we would expect the yen's exchange value to
A) appreciate against the dollar.
B) depreciate against the dollar.
C) remain constant against the dollar.
D) appreciate, depreciate, or remain constant against the dollar.

Question

Quizplus · Accepted Answer

It is difficult to predict the direction of the yen's exchange value against the dollar without knowing the relative strength of the demand for Japanese goods versus Canadian goods in each respective country, as well as other factors that could impact exchange rates. Therefore, the best answer is option D, which covers all possible outcomes.

Given Floating Exchange Rates, If Japan Increases Its Demand for Canadian