Question

5. In a floating exchange rate regime between Japan and the U.S, what happens to the dollar in the following cases a. An increase in the purchase of electronic equipment’s from Japan

Is it collect answer?

A. When the U.S buys more electronics from Japan, the demand for the Japanese yen will rise and the U.S currency will depreciate because more yen is needed to buy Japanese goods and the U.S will have to convert its currency by selling U.S dollars.

Answer 1

Exchange rate is value of currency in terms of another:

In a floating exchange rate , The exchange rate is determined by following factors:

Foreign demand for a country’s exports, Domestic demand for imports, Relative interest rate changes, Relative rates of inflation, Investment from abroad.

5. In a floating exchange rate regime between Japan and the U.S, what happens to the dollar in the following cases

Que. a. An increase in the purchase of electronic equipment’s from Japan

Answer . When the U.S buys more electronics from Japan, the demand for the Japanese yen will rise and the U.S currency will depreciate because more yen is needed to buy Japanese goods and the U.S will have to convert its currency by selling U.S dollars.

Yes it is a correct answer. As demand for Yen has increased, Yen appreciates and as supply of dollar has increased, dollar depreciates.