A persistent shortage of yen at a given fixed exchange rate (in dollars per yen)is evidence that the yen is ________ versus the dollar.This shortage can be reduced or eliminated through a ________ of the yen.
A)undervalued; devaluation
B)undervalued; revaluation
C)overvalued; revaluation
D)overvalued; devaluation

Question

Quizplus · Accepted Answer

A persistent shortage of yen at a given fixed exchange rate indicates that the demand for yen is higher than its supply at that rate, suggesting the yen is undervalued. To correct this, a revaluation (increasing the value of the yen relative to the dollar) would reduce or eliminate the shortage by making the yen more expensive, thus potentially decreasing demand and increasing supply.

A Persistent Shortage of Yen at a Given Fixed Exchange