If the Equilibrium Exchange Rate Between U

question 2

Multiple Choice

If the equilibrium exchange rate between U.S.dollars and Japanese yen is $0.01 = 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

---

Definitions:

Profit

The profit earned when the total income surpasses all the expenditures, costs, and taxes necessary for maintaining the business.

Profit-Maximizing

A strategy or approach taken by firms to achieve the highest possible profit from their operations.

Market Price

The existing rate at which an item or service is offered for buying or selling on the market.

Non-Negative Profit

A profit that is zero or positive, indicating that a business is not losing money.