Assume that Japan and the United States frequently trade with each other. Under the freely floating exchange rate system, high inflation in the U.S. will place ____ pressure on Japanese yen, ____ the amount of Japanese yen available for sale, and result in ____ inflation in Japan.

Question

Quizplus · Accepted Answer

High inflation in the U.S. will make U.S. goods more expensive, increasing demand for Japanese goods and the yen, putting upward pressure on the yen. The amount of yen available for sale will reduce as demand increases, and inflation in Japan remains unchanged initially.

Assume That Japan and the United States Frequently Trade with Each