Given a system of floating exchange rates,assume that Boeing Inc.of the United States places a large order,payable in yen,with a Japanese contractor for jet engine parts.The immediate effect of this transaction will be a shift in the:
A) Supply curve of yen to the left which causes the dollar to appreciate against the yen
B) Supply curve of yen to the right which causes the dollar to depreciate against the yen
C) Demand curve for yen to the left which causes the dollar to appreciate against the yen
D) Demand curve for yen to the right which causes the dollar to depreciate against the yen

Question

Quizplus · Accepted Answer

When Boeing places a large order payable in yen with a Japanese contractor, it increases the demand for yen as they need to purchase the yen to pay for the order. This increase in demand for yen will cause a shift in the demand curve for yen to the right, which will cause the dollar to depreciate against the yen. Therefore, the correct answer is D.

Given a System of Floating Exchange Rates,assume That Boeing Inc