How would Japan react to a depreciation of its own currency (the yen)?
Choose 1 answer:
(A) The quantity of yen supplied would decrease
(B) It would demand more of other currencies
(C) It would buy more foreign financial assets
(D) The quantity of yen supplied would increase
(E) It would not react to a change in the value of the currency

Question

Accepted Answer

∻Solution∻ ‖ a ⋮ Depreciation of Currency: When a country's currency depreciates, it means that the currency loses value relative to other currencies. ‖ ‖ b ⋮ Impact on Supply of Yen: A depreciation of the yen would typically lead to an increase in the quantity of yen supplied. This is because Japanese exporters would receive more yen for their goods sold abroad, and they might convert these foreign earnings back into yen. ‖ ‖ c ⋮ Correct Answer: Therefore, the correct answer is that the quantity of yen supplied would increase. ‖ ∻Answer∻ ⚹ (D) The quantity of yen supplied would increase ⚹ ∻Key Concept∻ ⚹ Currency Depreciation and Supply ⚹ ∻Explanation∻ ⚹ When a currency depreciates, it often leads to an increase in the supply of that currency as exporters convert their foreign earnings back into the domestic currency. ⚹◊How would the depreciation of Japan's currency affect its export competitiveness in the global market⍭ Generate me a similar question◊

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