Consider the purchase of a Japanese car by a U.S. citizen. Say that the yen/dollar exchange rate is 100 yen to a dollar and that the yen price of the car is 2.0 million yen, which is $20,000. The U.S. citizen (probably an automobile dealer) takes $20,000, buys 2.0 million yen, and then buys the car. Explain what happends to U.S. imports and the capital account after this transaction and the net wealth position of the United States.

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The Answer of Consider the purchase of a Japanese car by a U.S. citizen. Say that the yen/dollar exchange rate is 100 yen to a dollar and that the yen price of the car is 2.0 million yen, which is $20,000. The U.S. citizen (probably an automobile dealer) takes $20,000, buys 2.0 million yen, and then buys the car. Explain what happends to U.S. imports and the capital account after this transaction and the net wealth position of the United States.

Consider the Purchase of a Japanese Car by a U