Suppose the Exchange Rate Is Initially Set at 120 Yen

question 25

Multiple Choice

Suppose the exchange rate is initially set at 120 yen per dollar and increases to 140 yen per dollar.In the U.S.economy this would be expected to

• A)increase the U.S.trade deficit (or decrease the trade surplus).
• B)decrease the U.S.trade deficit (or increase the trade surplus).
• C)increase the U.S.trade deficit only if exports change by more than imports.
• D)leave the U.S.trade deficit unchanged.
• E)decrease the U.S.trade deficit only if exports change by more than imports.

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Definitions:

Closed Economy

An economic system that does not interact with other economies in terms of international trade or financial transactions.

Public Saving

The difference between tax revenues and government expenditures, typically representing the amount of surplus funds the government has.

Closed Economy

An economic system that does not engage in international trade, instead relying on its own internal markets for goods and services.

Accounting Identity

An equation that must always be true due to the way variables are defined, commonly used in economics and accounting to reflect the balance between different components.