ECONOMICS
TRADE EXCHANGE AND INTERDEPENDENCE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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European consumers of European Goods
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Japanese consumers of Japanese Goods
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European consumers of Japanese Goods
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None of the above
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Detailed explanation-1: -It implies that, at least in the short-run, the impact of the depreciation of the yen will benefit the Japanese exporters, not through increase in export volumes, but through increase in export values due to the increase in export prices in yen-terms for a stable export volumes.
Detailed explanation-2: -“The depreciation of the yen leads to an increased financial burden on households and businesses.” The shift also sinks Japanese wages relative to the dollar, meaning that more Japanese go abroad to work and fewer foreign workers come to Japan.
Detailed explanation-3: -A widening gap between Japanese and U.S. interest rates has been a main cause of the depreciation of the yen, because it facilitates the sale of the yen in the market.
Detailed explanation-4: -Currency appreciation benefits consumers, as it makes foreign goods cheaper, but it harms national producers who face greater competition with foreign producers. A depreciation has the opposite effect.