16-31. Consider the ways that Japan’s economy would likely be

16-31. Consider the ways that Japan’s economy would likely be

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June 27, 2022
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16-31. Consider the ways that Japan’s economy would likely be affected by having a strong yen versus a weak yen. Compare and discuss the positive implications and the negative implications for both a strong and a weak yen.

Answer and ExplanationSolution by a verified expert

Explanation
The currency of Country J has an impact on Country J's economy. The currency is important for the country's imports and exports, regardless of whether the currency is strong or weak since a strong currency discourages exports and a weak currency encourages exports.

The positive impact of a strong Currency Y is below:

A strong Currency Y encourages imports for Country J because a strong Currency Y enables Country J's companies to purchase other countries' products at a low cost.
A strong Currency Y reduces Country J's production cost because a strong Currency Y enables the companies of Country J to acquire production-related resources at a low cost.
A strong Currency Y has a higher exchange rate value than a weak Currency Y because a strong Currency Y needs less count to obtain foreign money.
The negative impact of a strong Currency Y is below:

A strong Currency Y decreases spending because foreign companies are less likely to get Country J's exports when Currency Y is strong. It is because they will have to pay more than what they will receive since the value of currencies will be different both in the home market and in Country J.
On the economic stimulus side of the equation, a strong Currency Y increases consumer spending as they will have more power and choices to divide their money into different goods. This high consumer spending can result in economic deflation and a sluggish economy.

The positive impact of a weak Currency Y is below:

A weak Currency Y helps the companies of Country J to export more goods because a weak Currency Y attracts foreign countries to purchase Country J's goods and services at a low cost.
A weak Currency Y enhances foreign investments in Country J's companies. It increases the employment opportunities in Country J as old companies grow and new companies set up their branches in the country.
The negative impact of a weak Currency Y is below:

A weak Currency Y leads to a lower exchange rate because the value of a weak Currency Y is less than foreign money. So, importers will have to pay more to obtain the foreign currency compared to what they will pay inside the nation. Also, weak Currency Y does not promote imports because a weak Currency Y makes Country J's companies unable to purchase other countries' products at a low cost.
A weak Currency Y increases Country J's production cost because a weak Currency Y makes Country J's manufacturers unable to acquire production-related resources at a minimum cost.
Sample Response
Having a strong Currency Y in comparison to a weak Currency Y will have an impact on the economy of Country J. The reason behind this is that a strong Currency Y enables Country J to import more. A strong Currency Y also means that Currency Y's value is more than other foreign currencies.

The positive effect of a strong Currency Y are:

It encourages import as the value of Currency Y is more than the foreign currency, reducing the cost of import.
It decreases the production cost because the purchasing power of the currency also enhances, so the price of goods might decrease rather than increase.
It increases the exchange rate because the strong currency is often enhanced at a higher rate because of its purchasing power and influence.
The negative effect of a strong Currency Y are:

It decreases foreign direct investment as a strong Currency Y means that the exchange rate of other currency will be less, which means that foreign companies have to pay more to invest in the business, discouraging them to opt for FDI.
It results in economic deflation and a sluggish economy as everyone has the purchasing power, but the production might not be enough to satisfy this demand.

The positive effect of a weak Currency Y are:

It increases export as the exchange rate will fall, and the native producers might sell more internationally to earn more profits.
It results in economic growth because the FDI and the per capita income increase.
The negative effect of a weak Currency Y are:

It lowers the exchange rate as the worth of the currency diminishes, and Country J's importers will have to pay more to the exporters to settle the payment.
It increases production cost as the purchasing power of the currency also falls with the diminishing value of the currency, which might lead to inflation.

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