If the Equilibrium Exchange Rate Between U

question 46

Multiple Choice

If the equilibrium exchange rate between U.S.dollars and Japanese yen is $0.007 = 1 yen,but currently the exchange rate is $0.009 = 1 yen,then with flexible exchange rates the dollar price of a yen will __________,and the yen will __________.

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

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Definitions:

Bond

A fixed income instrument that represents a loan made by an investor to a borrower, typically corporate or governmental.

Investment

The allocation of resources, such as time, money, or effort, in hopes of generating future returns or profit.

Interest Rate

The interest rate is the percentage of principal charged by the lender for the use of its money or the return on investment assets.

Wine Drinkers

Individuals who regularly consume wine, often with an appreciation for its varieties and qualities.