Assume that Japan and the United States are engaged in a system of flexible exchange rates. Refer to the graph above. If more Japanese tourists decide to visit the United States for their vacations:

Question

Assume that Japan and the United States are engaged in a system of flexible exchange rates.  Refer to the graph above. If more Japanese tourists decide to visit the United States for their vacations:

Quizplus · Accepted Answer

If more Japanese tourists decide to visit the United States for their vacations, there will be an increase in the demand for U.S. dollars as they will need to exchange yen for dollars to spend in the U.S. This will lead to an increase in the value of the U.S. dollar (appreciation) and a decrease in the value of the yen (depreciation). Therefore, choice B is the correct answer.

Assume That Japan and the United States Are Engaged in a System