Question
In the mid to late 1970s, the yen appreciated relative to the U.S. dollar, even though Japan's inflation rate was higher than America's. How can
In the mid to late 1970s, the yen appreciated relative to the U.S. dollar, even though Japan's inflation rate was higher than America's. How can this be explained by improvements in the productivity of the Japanese industry relative to the U.S. industry?
Japanese sectors that produce traded goods could have experienced (greater, lower) improvements in productivity than American sectors that produce traded goods. This would be associated with (an increase, a decline) in the price of Japanese traded goods relative to American traded goods. As a result, (the supply for, the demand of ) Japanese traded goods would, (fall, rise) leading to an appreciation of the yen.
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