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In: Economics

When there is an increase in the value of the Japanese yen​, all else​ equal: A.American...

When there is an increase in the value of the Japanese yen​, all else​ equal:

A.American businesses will see a decrease in demand for their goods in the United States only.

B.American businesses will see a decrease in demand for their goods in the United States and in foreign countries.

C.American businesses will see a decrease in the supply of their goods in the United States and in foreign countries.

D.American businesses will see an increase in demand for their goods in the United States and in foreign countries.

Can help explain the above question?

Solutions

Expert Solution

The answer is (d) American businesses will see an increase in demand for their goods in the United States and in foreign countries.

This is because an increase in the value of the Japanese Yen means that the YEN has appreciated and the US dollar has depreciated in value. Thus, the competitiveness of US products will increase as the purchasing power of foreign currencies has increased in the US. Thus, the demand for US goods will increase in foreign countries. The demand for US goods will also increase in the US as the US citizens will import less now.

All other options are wrong as thte demand and supply for US goods will not decrease

Rahul Sunny answered 2 years ago
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