Assume That There Are Only Two Countries in the World,the

question 20

Essay

Assume that there are only two countries in the world,the United States and Japan.What creates the demand for and supply of Japanese yen on the foreign exchange market? Name three different things that could cause the yen to appreciate in value.

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Definitions:

Substitution Effect

The economic principle that as prices rise (or incomes decrease), consumers will replace more expensive items with cheaper substitutes, holding utility constant.

Income

The amount of money received by an individual or household over a certain period, usually from employment or investments.

Price

The monetary figure anticipated, requisite, or paid as payment for a product.

Apples

A popular fruit known for its sweet taste, crisp texture, and variety of types, often used as a symbol in discussions comparing different goods or models in economics.