Figure 18-3
-Refer to Figure 18-3.Consider the market for U.S.dollars against the Japanese yen shown above.An event which could have caused the changes shown in the graph would be
A)an increase in U.S.real income.
B)speculators expect the dollar to depreciate in value in the near future.
C)an economic expansion in the United States.
D)a decrease in Japanese interest rates.

Question

Figure 18-3 
-Refer to Figure 18-3.Consider the market for U.S.dollars against the Japanese yen shown above.An event which could have caused the changes shown in the graph would be
A)an increase in U.S.real income. 
B)speculators expect the dollar to depreciate in value in the near future. 
C)an economic expansion in the United States. 
D)a decrease in Japanese interest rates.

Quizplus · Accepted Answer

A decrease in Japanese interest rates would make holding yen less attractive, leading to an increase in supply of yen in the foreign exchange market and a decrease in the value of yen relative to the dollar. This is shown by the rightward shift of the yen supply curve in the graph. The other options may have some impact on the foreign exchange market, but they are less likely to cause the specific changes shown in the graph.

Figure 18-3 -Refer to Figure 18-3.Consider the Market for U.S.dollars Against the U.S.dollars