The decline in the value of the yen in 2014 and 2015 occurred as a result of the Japanese central bank,the Bank of Japan,following an expansionary monetary policy.Investors expected that the result would be lower nominal Japanese interest rates and a higher inflation rate.In response,investors ________,causing the value of the yen to decline against the dollar.
A)sold Japanese yen and bought U.S.dollars
B)sold Japanese yen and sold U.S.dollars
C)bought Japanese yen and sold U.S.dollars
D)bought Japanese yen and bought U.S.dollars

Question

Quizplus · Accepted Answer

When investors expect a lower interest rate and higher inflation rate, they tend to sell the currency of the country involved and buy the currency of another country where they can earn higher interest rates. In this case, investors sold Japanese yen and bought U.S. dollars, causing the value of the yen to decline against the dollar. Therefore, option A is the best choice.

The Decline in the Value of the Yen in 2014