Suppose a U.S.-made machine costs 500 and the exchange rate is 100 yen = 1 . Now the exchange rate changes to 90 yen = 1 . Then the:
a. machine would now cost more dollars.
b. machine would now cost the Japanese citizen less yen.
c. machine would now cost less dollars.
d. machine would now cost the Japanese citizen more yen.
e. yen has depreciated in value.
Question 2
A lower interest rate makes more investment projects profitable, meaning that:
a. there is a direct relationship between the rate of interest and the quantity of investment spending.
b. there is an inverse relationship between the rate of interest and the quantity of investment spending.
c. there is no relationship between the rate of interest and the quantity of investment spending.
d. the demand curve for investment spending is horizontal.
e. the demand curve for investment spending is vertical.
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