Assume the exchange rate between the dollar and yen is ¥80= $1. Suppose that the exchange rate changes to ¥75 = $1. As a result of the change, there will be:
A)more Japanese goods sold in Australia and less Australian goods sold in Japan.
B)less Japanese goods sold in Australia and more Australian goods sold in Japan.
C)more Japanese goods sold in Australia and the same amount of Australian goods sold in Japan.
D)the same number of Japanese goods sold in Australia and less Australian goods sold in Japan.

Question

Quizplus · Accepted Answer

When the exchange rate changes to ¥75 = $1, it means that the dollar has appreciated relative to the yen. This means that Japanese goods become relatively more expensive for Australian buyers, while Australian goods become relatively cheaper for Japanese buyers. As a result, Australians will buy fewer Japanese goods, while Japanese buyers will increase their purchases of Australian goods. Therefore, there will be less Japanese goods sold in Australia, and more Australian goods sold in Japan.

Assume the Exchange Rate Between the Dollar and Yen Is