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

Question

Quizplus · Accepted Answer

When there is a strict quota placed on goods imported from Japan by the US, the US demand for Japanese yen would decline as there would be a decrease in the US imports of goods from Japan. Additionally, the supply of Japanese yen to be exchanged for US dollars would also decline as Japanese exporters would receive less US dollars due to the decrease in US imports. Therefore, both the demand for and the supply of Japanese yen would decline in this situation.

Assume That Japan Places a Strict Quota on Goods Imported