The demand in the United States for yen will increase if,other things remaining equal:

Question

Quizplus · Accepted Answer

If interest rates rise in Japan, it will become more attractive to hold yen deposits, and therefore, there will be increased demand for yen. This is due to the fact that the higher interest rates will lead to higher returns on yen deposits, which will attract foreign investors who are seeking higher returns. The increase in demand for yen will cause an appreciation in the value of the yen against the US dollar.

Other choices are not likely to lead to an increase in the demand for yen. If labor costs rise in Japan, it may result in higher production costs, which could reduce the demand for yen. If income rises in Japan or prices rise in Japan, it may lead to higher consumption and imports, which could increase the demand for goods denominated in US dollars, thus leading to a decrease in the demand for yen.

The Demand in the United States for Yen Will Increase