ECONOMICS
TRADE EXCHANGE AND INTERDEPENDENCE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Appreciate, Appreciate, Move toward deficit
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Appreciate, Depreciate, Move toward deficit
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Depreciate, Depreciate, Move toward surplus
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No change, Appreciate, Move toward deficit
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Detailed explanation-1: -Differentials in Interest Rates Higher interest rates offer lenders in an economy a higher return relative to other countries. Therefore, higher interest rates attract foreign capital and cause the exchange rate to rise.
Detailed explanation-2: -US Dollar to Japanese Yen Exchange Rate is at a current level of 136.79, up from 135.55 the previous market day and up from 115.32 one year ago. This is a change of 0.92% from the previous market day and 18.62% from one year ago.
Detailed explanation-3: -In an idealised example, when interest rates rise, investors are attracted to a currency and invest in it more heavily. As more investors are attracted, demand for the currency increases, and its value goes up. These flows of investment are known in economics as ‘hot money flows’.
Detailed explanation-4: -Answer and Explanation: When the dollar appreciates relative to the Japanese yen, a single dollar buys more Japanese yen. This also means that the Japanese yen buys fewer dollars. If a single Japanese yen buys fewer dollars, the Japanese yen has depreciated relative to the dollar.