If the rate of inflation in Japan dramatically increases while the rate of inflation in the United States remains constant,
A) the demand curve for dollars shifts to the left
B) the demand curve for dollars shifts to the right
C) the demand curve for yen shifts to the right
D) the demand curves for both yen and dollars remain constant

Question

Quizplus · Accepted Answer

If inflation in Japan increases while it remains constant in the US, Japanese goods become relatively more expensive compared to US goods. This would increase the demand for US dollars as people and businesses seek to purchase more US goods and services, shifting the demand curve for dollars to the right.

If the Rate of Inflation in Japan Dramatically Increases While