Suppose that the Japanese yen appreciates significantly at some point,thus making Japanese imports more expensive.Japanese exporters may lower their profit margins to reduce the effect of the yen appreciation on U.S.importers,producing a phenomenon known as
A)the J-curve.
B)the absorption effect.
C)pricing to market.
D)international reserves compliance.

Question

Quizplus · Accepted Answer

The phenomenon described in the question is known as "pricing to market." This is where exporters choose to keep their prices relatively stable despite changes in exchange rates in order to maintain market share. By doing so, they accept lower profit margins in the short term. The J-curve refers to the short-term decline in a country's trade balance following a currency depreciation, while the absorption effect refers to the transfer of the cost of a tax or other economic shock from consumers to producers. International reserves compliance refers to a country's adherence to international regulations regarding its foreign currency reserves. None of these options describe the scenario presented in the question.

Suppose That the Japanese Yen Appreciates Significantly at Some Point,thus