Assume the U.S. government wants to hold the value of the dollar at $1.00 U.S. equals 120 Japanese yen, but it finds that the value of yen is appreciating against the U.S. dollar. What would be an appropriate policy to reverse this trend?
A) Buy more Japanese goods.
B) Buy U.S. dollars.
C) Sell U.S. dollars.
D) Encourage U.S. investments abroad.

Question

Quizplus · Accepted Answer

Buying U.S. dollars would increase the demand for dollars, thereby increasing its value relative to the yen, counteracting the appreciation of the yen.