When the yen gets "stronger" relative to the dollar,
A)the U.S. trade deficit with Japan will rise.
B)the U.S. trade deficit with Japan will fall.
C)the U.S. trade deficit with Japan will be unchanged.
D)None of the above necessarily happens.

Question

Quizplus · Accepted Answer

When the yen gets "stronger," it means that it takes fewer yen to buy one dollar. This leads to a decrease in the price of Japanese goods and an increase in the price of U.S. goods in Japan. As a result, U.S. exports to Japan increase and Japanese imports to the U.S. decrease, leading to a reduction in the U.S. trade deficit with Japan. Therefore, the correct answer is B.

When the Yen Gets "Stronger" Relative to the Dollar