Suppose That Interest Rates Decrease in Japan and at the Same

Multiple Choice

Suppose that interest rates decrease in Japan and at the same time the Japanese economy is experiencing a recession. What will happen to the value of the dollar relative to the yen?

A) The dollar will appreciate relative to the yen.
B) The dollar will depreciate relative to the yen.
C) One would have to know the size of the demand shift relative to the supply shift to answer correctly.
D) There will be no change in the relative exchange rate.