Question

If the U.S. Congress imposes a quota on imports of Japanese cars due to claims of "unfair" trade practices, and Japanese demand for American exports increases at the same time, then, in the long run ________, everything else held constant.

Answer 1

Answer:

The Japanese Yen will depreciate relative to the U.S. Dollar

Explanation:

In international trade, appreciation and depreciation of currency are calculated in terms of exports and imports. If exports of a country exceeds it imports, it has trade balance in its favor, and hence, its currency witnesses appreciation. In case of imports exceeding exports, the revers is inevitable.

In this case, Japanese exports will come down compared to its imports while American exports increases, and if this trend continues for a long time, then the dollar will appreciate and Japanese Yen will depreciate.