Supply and Demand for Currencies
Exploration: Determine the impact of various events on the dollar price of the yen and the quantity of yen traded.

The market for the yen (Japanese currency), operates just as any other market operates: subject to the laws of demand and supply and the other general principles we have been studying. The following interactive graph shows the supply and demand curves for the yen. As with any other good, the supply of yen represents those people who are selling yen and the demand for the yen represents those people are buying yen. Sellers of yen are Japanese citizens who want to buy U.S. goods and assets. Buyers of yen are U.S. citizens who want to buy Japanese goods and assets. (For simplicity, we assume that the only countries that exist are the United States and Japan .) With the help of the interactive graph, determine the impact of each of the following on the dollar price of the yen and the quantity of yen traded in this foreign exchange rate market.

1. Interest rates fall in the United States .
   See answer here
2. T he U.S. stock market is booming, increasing U.S. stock prices and the expected returns on many U.S. assets, relative to foreign assets.
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3. The United States experiences an economic boom creating more jobs and higher incomes.
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4. Japan falls into a deep recession.
   See answer here