Suppose that initially we have an exchange rate of 130 yen to the dollar.Suddenly trouble develops in the Japanese stock market,making American stocks more attractive than before.We expect that the dollar will ________ against the yen,meaning that it will cost ________ than 130 yen.

Question

Quizplus · Accepted Answer

When a country's market suffers from instability, its currency is likely to depreciate. Therefore, when trouble develops in the Japanese stock market, the yen is likely to depreciate against the dollar. This means that it will cost more than 130 yen to buy a dollar, so the dollar will appreciate against the yen.

Suppose That Initially We Have an Exchange Rate of 130