If income is rising faster in Japan than in the United States,there will be an increase in the demand for the yen and a decrease in the demand for the dollar.
If income in Japan rises faster than in the United States,Japan will purchase more American goods and this will increase the demand for the dollar,causing it to appreciate and the yen to depreciate.

Question

Quizplus · Accepted Answer

If income is rising faster in Japan than in the United States, there will be an increase in the demand for the yen and a decrease in the demand for the dollar. This is because people will have more purchasing power and will seek to buy more goods and services, including imports, which will increase the demand for yen. It will also make Japanese goods relatively more expensive for Americans, thus reducing their demand for Japanese exports and decreasing the demand for the dollar in Japan. Therefore, the yen is expected to appreciate relative to the dollar, not the other way around.

If Income Is Rising Faster in Japan Than in the United