Which example of market expectations causes the dollar to appreciate against the yen- expectations that the U.S economy will have ?
Correct answer: B. higher future interest rates than Japan
- A. faster economic growth than Japan
- B. higher future interest rates than Japan
- C. more rapid money supply growth than japan
- D. higher inflation rates than japan
Explanation
Higher expected U.S. interest rates attract funds toward dollar assets, increasing demand for dollars and causing appreciation against the yen. Faster growth may also attract funds, but the standard exchange-rate expectation here is higher future interest rates.
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