Questions 3-5 correspond with the US Market for Foreign Exchange with Japan, where the price of

$

foreign exchange is dollars divided by yen (i.e. Y ), and quantity is the quantity of yen.

3. In the U.S. market for foreign exchange with Japan, how is this market affected by an increase in exports (i.e. US exports to Japan)?

a. increase in the demand for foreign exchange

b. decrease in the demand for foreign exchange

c. increase in the supply of foreign exchange

d. decrease in the supply of foreign exchange

e. increase in both the demand and supply of foreign exchange

4. Which of the following events lead to a shift(s) in this model that make US goods and services less expensive for Japanese citizens?

a. increase in exports to Japan

b. increase in imports from Japan

c. increase in capital inflow from Japan d. none of the above

5. Which of the following would lead directly to appreciation of the dollar (relative to the yen)? a. increase in supply of foreign exchange

b. increase in demand for foreign exchange

c. decrease in supply of foreign exchange

d. none of the above

e. both b and c are correct