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Ch 5 Global Trade [AP & Reg]

B it is more important to reduce world inflation than

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Unformatted text preview: . and decrease the dollars supplied for Japanese goods. for Quantity of Dollars 2. Given your answer in 1, indicate what will happen to the Value of the U.S. dollar relative to the Japanese yen. Value Answer 2: Due to the decrease in supply of U.S. dollars Answer [as shown above], it will take more yen to purchase a dollar, [as purchase depreciating the yen and therefore appreciating the dollar. therefore 1. Increase in taste [more demand for a country’s products or assets] 2. Increase in interest rates [Overseas investors increase their investments there.] 3. Decrease in price level [overseas buyers want to buy our cheaper goods.] 4. Decrease in growth rate [A country’s declining economy results in them buying less from other countries; decreasing demand for their currency and thus appreciating the declining economy’s currency] 5. Decrease in the price of a currency relative to the other (50%) 1. If Mexico increases their investments in the U.S., the supply of Mexican (50%) Mexico supply p...
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