If the Equilibrium Exchange Rate Between U

question 63

Multiple Choice

If the equilibrium exchange rate between U.S.dollars and Japanese yen is $0.008 = 1 yen,but currently the exchange rate is $0.007 = 1 yen,then with flexible exchange rates the dollar price of a yen will __________,and the dollar will __________.

• A) increase; appreciate
• B) decrease; appreciate
• C) increase; depreciate
• D) decrease; depreciate

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Definitions:

Hidden Tax

A non-obvious tax or financial burden on consumers that is not directly imposed by legislation but occurs through regulation or other means.

Value-Added Tax (VAT)

A type of consumption tax that is placed on a product whenever value is added at a stage of production and at the point of retail sale.

Tax Burden

The overall impact of taxes on an individual's or company's financial well-being, often expressed as a percentage of income or revenue.

Proportional

Pertaining to a relationship where changes in one quantity result in proportional changes in another quantity.