Suppose That, in a System of Floating or Market-Determined Exchange

Multiple Choice

Suppose that, in a system of floating or market-determined exchange rates, the equilibrium exchange rate is 80 Japanese yen = $1. If there is then a change in preferences of U.S. consumers such that they now prefer more Japanese goods in their consumption bundle, then, other things equal, the equilibrium exchange rate __________, which is __________.

A) will move toward a lower price for the dollar ; an appreciation of
The yen relative to the dollar
B) will move toward a lower price for the dollar ; an appreciation of
The dollar relative to the yen
C) will move toward a higher price for the dollar ; an appreciation of
The yen relative to the dollar
D) will move toward a higher price for the dollar ; an appreciation of
The dollar relative to the yen