Multiple Select QuestionSelect all that applyIf the inflation rate in China is rising much faster than the rate in Japan, what would be the effects on the demand for each country's goods and currency?Multiple select question.The demand for Japanese goods will rise in China causing the demand for the Japanese currency to fall.The demand for Chinese goods will fall in Japan causing the supply of Chinese currency to fall.The demand for Chinese goods will rise in Japan causing the supply of Chinese currency to rise.The demand for Japanese goods will rise in China causing the demand for the Japanese currency to rise.
Question
Multiple Select QuestionSelect all that applyIf the inflation rate in China is rising much faster than the rate in Japan, what would be the effects on the demand for each country's goods and currency?Multiple select question.The demand for Japanese goods will rise in China causing the demand for the Japanese currency to fall.The demand for Chinese goods will fall in Japan causing the supply of Chinese currency to fall.The demand for Chinese goods will rise in Japan causing the supply of Chinese currency to rise.The demand for Japanese goods will rise in China causing the demand for the Japanese currency to rise.
Solution
The correct answers are:
- The demand for Japanese goods will rise in China causing the demand for the Japanese currency to rise.
- The demand for Chinese goods will fall in Japan causing the supply of Chinese currency to fall.
Explanation:
If the inflation rate in China is rising much faster than the rate in Japan, the value of Chinese goods will increase relative to Japanese goods. This means that Chinese goods will become more expensive for both Chinese and Japanese consumers.
As a result, the demand for Japanese goods will rise in China because they are relatively cheaper. This increased demand for Japanese goods will also cause an increased demand for the Japanese currency, as Chinese consumers will need to exchange their currency to purchase these goods.
On the other hand, the demand for Chinese goods will fall in Japan because they are relatively more expensive. This decreased demand for Chinese goods will cause the supply of Chinese currency to fall, as Japanese consumers will need less of it to purchase Chinese goods.
Similar Questions
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