The U.S. dollar exchange rate, e, where e is the nominal exchange rate expressed as Japanese yen per U.S. dollar, will appreciate when:

Question

Quizplus · Accepted Answer

Easy monetary policy decreases domestic interest rates, decreasing the desire for foreigners to hold financial assets. If the Bank of Japan eases monetary policy, interest rates in Japan will decrease and so will the supply of dollar from American savers. This will make the U.S. dollar appreciate.

The US Dollar Exchange Rate, E, Where E Is the Nominal