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

Question

Quizplus · Accepted Answer

When Japanese companies increase their importation of U.S. products, they need to purchase more U.S. dollars. This results in an increase in the supply of yen, as they sell yen to buy dollars. With more yen available in the market, the value of yen relative to the dollar will decrease, resulting in depreciation of yen. Therefore, the correct answer is B.

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