Due to Japan's high saving rate, suppose that the Japanese invest abroad. This investment may result in a/an _______ of the Japanese yen and therefore a for Japan?
Correct answer: C. depreciation; trade surplus
- A. appreciation; trade surplus
- B. appreciation; trade deficit
- C. depreciation; trade surplus
- D. depreciation; trade deficit
Explanation
Investing abroad increases the supply of yen in foreign-exchange markets, causing yen depreciation. The resulting cheaper Japanese exports and more expensive imports tend to support a trade surplus.
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