Question

8) If, in retaliation for "unfair" trade practices, Congress imposes a 30 percent tariff on Japanese DVD recorders, but at the same time, U.S. demand for Japanese goods increases, then, can you predict anything about the Japanese Yen’s value with respect to US dollar in long run? (everything else held constant)

Answer 1

Exchange rate is the rate at which one currency is exchage with other corrency .

In the above case we can see that US demand for the japan dvd recorder which means that japan goods are highly demanded in US but the tariff on these goods are high and there by japan is not able to provide these goods at cheaper price to US and hence japan needs of US currency is high and there for US corrency gets higher value over the japan yan . In the long run the value of US dollar is appericiated than the japan yan . Dur to high tarif there is discourage of imports of Japan dvd recorded in US