Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
They can increase the value of the Yen by reducing supply.
B
They have no effect on the value of the Yen.
C
They always decrease the value of the Yen regardless of the context.
D
They only affect the value of the Yen during economic crises.
Understanding the Answer
Let's break down why this is correct
Answer
Central bank interventions can significantly influence the value of the Yen when compared to the US Dollar. When the Bank of Japan decides to intervene, it might buy or sell Yen to stabilize its value. For example, if the Bank of Japan sells Yen and buys US Dollars, this increases the supply of Yen in the market, which can lead to a lower value of the Yen against the Dollar. Conversely, if they buy Yen, it reduces the supply and can increase its value. Such actions are often taken to control inflation or boost exports, showing how central banks play a crucial role in currency value dynamics.
Detailed Explanation
When a central bank reduces the supply of Yen, it makes each Yen more valuable. Other options are incorrect because Some might think that central bank actions don't matter; It's a common mistake to think that central bank actions always lower the Yen's value.
Key Concepts
central bank interventions
currency pairs
Topic
Yen Market Dynamics
Difficulty
medium level question
Cognitive Level
understand
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