An excess demand for dollars in exchange for yen will cause:
A)no change in the exchange rate of the yen to the dollar.
B)the dollar to appreciate relative to the yen.
C)the yen to appreciate against all major currencies.
D)the dollar to decline in value relative to the yen.

Question

Quizplus · Accepted Answer

An excess demand for dollars in exchange for yen means there are more people who want to buy dollars than those who want to sell yen. This increases the demand for dollars and decreases the supply of yen, which leads to an increase in the value of the dollar relative to the yen, causing the dollar to appreciate.

An Excess Demand for Dollars in Exchange for Yen Will