1a. In the foreign exchange market, a decrease in the world demand for Japanese exports

a. shifts the demand curve for yen leftward, which causes the yen to appreciate.

b. shifts the demand curve for yen rightward, which causes the yen to appreciate.

c. shifts the demand curve for yen rightward, which causes the yen to depreciate.

d. shifts the demand curve for yen leftward, which causes the yen to depreciate.

1b. A relatively high rate of inflation in the United States will result in

a. an appreciation of the dollar against foreign currencies in the short run.

b. a depreciation of the dollar against foreign currencies in the long run.

c. an appreciation of the dollar against foreign currencies in the long run.

d. a depreciation of the dollar against foreign currencies in the short run.

1c. The demand curve for euros in the foreign exchange market will increase (shift rightward) if

a. European interest rates fall relative to foreign interest rates.

b. the current exchange value of the euro depreciates.

c. the rate of inflation in Europe is less than the rate of inflation throughout the world.

d. Europe increases tariffs and applies more stringent quotas on imported goods.

1d. The theory of purchasing power parity states that changes in the nominal exchange rate arise from differences in ______ among countries.

a. real interest rates

b. inflation rates

c. productivity rates

d. nominal interest rates