If Inflation in the United States Is Relatively Higher Than

Multiple Choice

If inflation in the United States is relatively higher than inflation in Japan, and the Japanese government wants to keep the exchange rate fixed between the yen and the dollar, it should most likely ________.

A) allow its currency to rise against the dollar
B) allow its currency to fall against the dollar
C) increase the supply of yen in the market
D) decrease the supply of yen in the market