If the equilibrium exchange rate between U.S.dollars and Japanese yen is $0.01 = 1 yen but currently the exchange rate is $0.0089 = 1 yen,then a __________ exists.

Question

Quizplus · Accepted Answer

When the current exchange rate is lower than the equilibrium rate ($0.0089 < $0.01), it means that yen is cheaper than it should be, indicating a surplus of dollars (people have more dollars they want to exchange for yen) and a shortage of yen (there's not enough yen available at this price for all the dollars people want to exchange).

If the Equilibrium Exchange Rate Between U