The demand for yen in exchange for dollars will increase if, ceteris paribus:
A)Japanese interest rates increase relative to interest rates in other countries.
B)income in Australia falls.
C)speculators think the value of the yen relative to the dollar will fall.
D)the desirability of investing in Japan falls.

Question

Quizplus · Accepted Answer

When Japanese interest rates increase relative to interest rates in other countries, this makes Japanese investments more attractive and increases demand for yen, causing its exchange rate to increase. The other choices do not directly affect the demand for yen.

The Demand for Yen in Exchange for Dollars Will Increase