If the equilibrium exchange rate between U.S.dollars and Japanese yen is $0.01 = 1 yen,but currently the exchange rate is $0.009 = 1 yen,then with flexible exchange rates the dollar price of a yen will __________ and the yen will __________.

Question

Quizplus · Accepted Answer

Given the current exchange rate ($0.009 = 1 yen) is lower than the equilibrium rate ($0.01 = 1 yen), the dollar price of a yen will increase to reach equilibrium, and as the value of yen increases in terms of dollars, the yen will appreciate.

If the Equilibrium Exchange Rate Between U