If the United States decided to ﬁx its exchange rate with Japan, this would

Question

Quizplus · Accepted Answer

If the United States fixed its exchange rate with Japan, it would mean that the U.S. government would have to become the dollar-yen foreign exchange market in order to maintain the fixed rate. This would involve buying and selling yen in order to keep the exchange rate stable. It would not require the U.S. to fix its exchange rate with all other currencies, nor would it necessarily prevent a trade deficit with Japan. And, it would not ensure that the U.S. dollar would always appreciate against the yen.

If the United States Decided to ﬁX Its Exchange Rate