Question

In considering the market for yen and dollars, when the dollar depreciates:_________
A) the yen appreciates.
B) the yen will also depreciate.
C) the yen may either appreciate or depreciate.
D) U.S. net exports to Japan will fall.

Answer 1

It would be the Yeni may either appreciate amor depreciate

Answer 2

In the market for the Yen and the U.S. Dollar, a depreciation in the Dollar would see A) the yen appreciating.

What happens when the Dollar depreciates?

In a market where there is only the Yen and the U.S. Dollar, both currencies will have a negative correlational relationship.

This means that when one appreciates in value, the other will depreciate. If the U.S Dollar depreciates therefore, the Yen will appreciate.

In conclusion, option A is correct.

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