Under a Fixed Exchange Rate System, an Increase in Japanese

question 113

Multiple Choice

Under a fixed exchange rate system, an increase in Japanese demand for U.S.agricultural goods would

• A)cause the U.S.balance of trade to worsen
• B)increase the supply of yen relative to the dollar
• C)decrease Japanese demand for dollars
• D)cause the yen to appreciate
• E)cause an immediate revaluation of the yen

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Definitions:

Equilibrium Price

The price at which the quantity of goods supplied is equal to the quantity of goods demanded.

Equilibrium Quantity

The quantity of goods or services supplied is equal to the quantity demanded at the market price.

Shift Demand

A change in the amount of a product that consumers are willing and able to purchase at any given price level, typically caused by changes in consumer preferences, income, or prices of related goods.

Substitute Good

A product or service that can be used in place of another to satisfy consumer demand or preferences.