Which of the following figures shows the correct shift in the market for the Japanese yen if the real exchange rate appreciates in Japan?

Question

Quizplus · Accepted Answer

An appreciation in the real exchange rate would make Japanese goods relatively more expensive compared to foreign goods, which would decrease demand for Japanese goods and cause a leftward shift in the demand curve for yen (from D1 to D2). This would lead to a decrease in the equilibrium exchange rate and quantity of yen traded. Choice B is the only figure that shows this leftward shift in the demand curve for yen.

Which of the Following Figures Shows the Correct Shift in the Market