In the dollar-yen foreign exchange market, if Japanese companies sharply increase their importation of U.S. products, then the

Question

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If Japanese companies increase their importation of U.S. products they will need to exchange yen for dollars to make payments to the U.S. suppliers. This will increase the supply of yen in the foreign exchange market and increase the demand for dollars. As a result, the yen will depreciate against the dollar.

In the Dollar-Yen Foreign Exchange Market, If Japanese Companies Sharply