Question

When Americans and foreigners expect the return on ________ deposits to be higher than on ________ deposits, there will be a greater demand for dollars and a greater supply of yen.
Select one:
A) yen; yen
B) Dollars; yen
C)Dollars; Dollars
D) yen; Dollars

Answer 1

Answer : B) Dollars; Yen

When the demand for Dollars increases, the value increases. Dollar is said to be appreciated against other currencies. Then the investors in Dollar can expect a higher return than in other currencies. When the supply of Yen increases, it is said to be depreciated and to be devalued. The investors in Yen cannot expect a higher return.

So the Americans and foreigners can expect the return on Dollars deposits to be higher than on Yen deposits, when there will be a greater demand for dollars and a greater supply of yen.