Suppose that signs of an improvement in the Japanese economy lead international investors to resume lending to the Japanese government and businesses. Policymakers, however, are worried about how this will influence the yen.
This event would cause
A. an increase in the demand for the yen, and the yen would appreciate.
B. a decrease in the demand for the yen, and the yen would depreciate.
C. an increase in the supply of the yen, and the yen would appreciate.
D. a decrease in the supply of the yen, and the yen would depreciate.
If the central bank, the Bank of Japan, wants to keep the value of the yen unchanged, then it should
A. peg the yen's value to gold at the original exchange rate.
B. buy more dollars because it is unsure about the future of the Japanese economy.
C. buy more yen, thereby decreasing its supply and the value of the yen will rise to its original level.
D. buy foreign currencies in exchange for the yen, thereby increasing its supply and value of the yen will fall to its original level.