Assume that Japan places a strict quota on goods imported from the UK and the UK places a strict quota on goods imported from Japan. This event should immediately cause the UK demand for Japanese yen to ____, and the supply of Japanese yen to be exchanged for pounds to ____.

Question

Quizplus · Accepted Answer

The UK demand for Japanese yen will decline because fewer goods are being imported from Japan, reducing the need for yen. Similarly, the supply of yen to be exchanged for pounds will decline because Japan will also import fewer goods from the UK, reducing the need to exchange yen for pounds.

Assume That Japan Places a Strict Quota on Goods Imported