Suppose the Currency Price of the U

question 263

Multiple Choice

Suppose the currency price of the U.S. dollar in terms of the Japanese yen starts to fall. To prevent that from occurring, the U.S. central bank should

• A) use U.S. dollars to buy Japanese goods.
• B) use yen reserves to buy U.S. dollars in the foreign exchange market.
• C) sell U.S. dollars in the foreign exchange market in exchange for yen.
• D) buy both U.S. dollars and yen in the foreign exchange market.

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Definitions:

Shortage

A situation where the demand for a good or service exceeds its supply in a market.

Quantity Demanded

The amount of a product that consumers are willing to buy at a specific price point, at a given time.

Equilibrium Price

The market price at which the quantity of a good demanded by consumers equals the quantity supplied by producers, leading to a stable market condition.

Supply Falls

A situation where the quantity of goods or services available decreases in relation to demand.