Assume a System of Floating Exchange Rates

question 100

Multiple Choice

Assume a system of floating exchange rates.Due to a high savings rate, suppose the level of savings in Japan is in excess of domestic investment needs.If Japanese residents invest abroad, then the yen's exchange value will ____ , and the Japanese trade balance will move toward ____.

• A) appreciate, deficit
• B) appreciate, surplus
• C) depreciate, deficit
• D) depreciate, surplus

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Definitions:

Total Revenues

The total amount of income generated by a business from its sales of goods or services before any expenses are subtracted.

Capital Account

An account showing the net worth of a business at a specific point, accounting for assets minus liabilities.

Statement of Owner's Equity

A financial document that summarizes the changes in the equity of a company over a period, including investments, withdrawals, and the net income or loss.

Income Statement

A financial report summarizing the revenues, costs, and expenses incurred during a specific period, typically a fiscal quarter or year.