Question

The diagram shows the market equilibrium exchange rate between the Japanese yen and the U.S. dollar (USD). Suppose that capital flows from the United States to Japan increase. Shift the demand and supply curves as appropriate. Quantity of yen This change in the exchange rate will result in the balances of payments on Japan's current account and financial account rising. o the balance of payments on Japan's current account falling as the balance of payments on Japan's financial This change in the exchange rate will result in O the balances of payments on Japan's current account and financial account rising. O the balance of payments on Japan's current account falling as the balance of payments on Japan's financial account rises. O the balances of payments on Japan's current account and financial account falling O the balance of payments on Japan's current account rising as the balance of payments on Japan's financial account falls.

Answer 1

as capital flows from US to japan increase,

ans B

japan capital flows increase

currency of japan appreciates

capital account improves

current account depreciates because exports are now decreased and imports have increased due to currency appreciation