-Refer to Figure 17-1.Assume the equilibrium exchange rate is $0.008 per yen at point A.If U.S.consumers decide to purchase more automobiles from Japan,then
A) nothing will happen
B) the supply curve will shift to S' and the demand curve will shift to D'
C) the supply curve will shift to S'
D) the demand curve will shift to D'
E) exchange rate will return to $0.008 as soon as the market adjusts.

Question

-Refer to Figure 17-1.Assume the equilibrium exchange rate is $0.008 per yen at point A.If U.S.consumers decide to purchase more automobiles from Japan,then
A) nothing will happen 
B) the supply curve will shift to S' and the demand curve will shift to D' 
C) the supply curve will shift to S' 
D) the demand curve will shift to D' 
E) exchange rate will return to $0.008 as soon as the market adjusts.

Quizplus · Accepted Answer

When U.S. consumers purchase more automobiles from Japan, the demand for yen increases as they need yen to pay for the imports. This shifts the demand curve for yen to the right (D').