An appreciation of the U.S. dollar relative to the Japanese yen causes
A) a lower dollar-price of Japanese goods which induces the U.S. to increase their purchasing of Japanese goods.
B) the quantity demanded of U.S. dollars to increase because the Japanese want to buy more U.S. goods.
C) the Japanese to buy more U.S. goods, causing the dollars to appreciate further.
D) the U.S. to buy less Japanese goods, causing the U.S. to depreciate.

Question

Quizplus · Accepted Answer

When the U.S. dollar appreciates relative to the Japanese yen, it becomes relatively cheaper to buy Japanese goods in the U.S. This induces consumers in the U.S. to increase their purchasing of Japanese goods (Choice A), which can lead to increased imports from Japan. Choice B is incorrect because an appreciation of the U.S. dollar would actually make U.S. goods relatively more expensive for Japanese buyers, potentially reducing their demand for U.S. goods. Choice C is also incorrect because an appreciation of the U.S. dollar is unlikely to cause further appreciation, as exchange rates are determined by a variety of economic factors. Choice D is incorrect because an appreciation of the U.S. dollar would not cause the U.S. to depreciate; rather, it would cause the U.S. to be able to buy fewer Japanese goods for each dollar.

An Appreciation of the U