Work It Out Chapter 19(34)

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Work It Out

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Suppose the United States and Japan are the only two trading countries in the world. What will happen to the value of the U.S. dollar if the following occur, other things equal?

If Japan relaxes some of its import restrictions then the dollar will .

If Japan relaxes import restrictions, Japanese residents will demand more U.S. goods and more U.S. dollars to buy those goods. The U.S. dollar will appreciate due to the increase in the demand for U.S. dollars. For further review see section, “The Equilibrium Exchange Rate.”

If Japan relaxes some of its import restrictions then the dollar will ______.

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The United States imposes some import tariffs on Japanese goods then the dollar will .

If the United States imposes import restrictions, Americans will buy fewer Japanese goods. Americans will want to exchange fewer U.S. dollars for yen, so the supply of U.S. dollars will decrease and the U.S. dollar will appreciate. For further review see section, “The Equilibrium Exchange Rate.”

The United States imposes some import tariffs on Japanese goods then the dollar will ______.

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Interest rates in the United States rise dramatically then the dollar will .

A dramatic rise in U.S. interest rates will attract Japanese buyers of American assets as well as discourage Americans from buying Japanese assets. There will be an increase in the demand for U.S. dollars and a decrease in the supply of U.S. dollars; the U.S. dollar will appreciate. For further review see section, “The Equilibrium Exchange Rate.”

Interest rates in the United States rise dramatically then the dollar will ______.

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A report indicates that Japanese cars last much longer than previously thought, especially compared with American cars then the dollar will .

A report indicating that Japanese cars last much longer than previously thought, especially when compared with American cars, will increase the demand for Japanese cars and the demand for Japanese yen. The yen will appreciate and the U.S. dollar will depreciate. For further review see section, “The Equilibrium Exchange Rate.”

A report indicates that Japanese cars last much longer than previously thought, especially compared with American cars then the dollar will ______.

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Work It OutChapter 19(34)

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