In 1985, the exchange rate between the U.S. dollar and the Japanese yen was $1 = 262 yen; in 2003, the rate was $1 = 110 yen. Which one of the following might be a plausible explanation for the
Change in the dollar-yen exchange rate from 1985 to 2003?
A) Japan exported much more to the United States during this period than it imported from the United States.
B) Japan greatly increased its purchases of military equipment from the United States during this period.
C) Japan's economy grew far faster than the U.S. economy during this period.
D) Japan's government devalued the yen during this period.

Question

Quizplus · Accepted Answer

The yen appreciated against the dollar from 1985 to 2003, which means the demand for yen increased relative to the dollar. A plausible explanation is that Japan exported much more to the United States than it imported, leading to higher demand for yen to pay for Japanese goods.

In 1985, the Exchange Rate Between the U