If,in retaliation for "unfair" trade practices,Congress imposes a 30 percent tariff on Japanese DVD recorders,but at the same time,U.S. demand for Japanese goods increases,then,in the long run,________,everything else held constant.

Question

Quizplus · Accepted Answer

The imposition of a tariff on Japanese DVD recorders by Congress would increase the price of those goods for U.S. consumers, reducing demand for Japanese products in the short run. However, if U.S. demand for Japanese goods increases in the long run despite the tariff, the demand for Japanese yen would increase as well, which could lead to an appreciation of the yen relative to the U.S. dollar. On the other hand, it is also possible that the Japanese government may respond to the U.S. tariff by implementing countermeasures that reduce demand for U.S. goods in Japan, which could lead to a depreciation of the yen relative to the U.S. dollar. Therefore, the answer is D, as the effect on the exchange rate is uncertain and could go either way depending on the specifics of the situation.

If,in Retaliation for "Unfair" Trade Practices,Congress Imposes a 30 Percent