Under a flexible exchange-rate system,an increase in the demand for Japanese yen would cause the U.S.dollar-Japanese yen exchange rate to
A)fall.
B)rise.
C)remain unchanged, because supply also increases.
D)remain unchanged, because the exchange rate is set by the central bank.

Question

Quizplus · Accepted Answer

An increase in demand for Japanese yen would mean that more people want to buy yen, leading to an increase in its value. As a result, the U.S. dollar-Japanese yen exchange rate would rise. This is because the exchange rate is determined by market forces of demand and supply.

Under a Flexible Exchange-Rate System,an Increase in the Demand for Japanese