Chapter 18, Problem 2QFT

To determine

Concept Introduction:

Abenomics:

In Japan, when Mr. S became the prime minister the country was going through a negative inflation. He followed the ease of monetary policy. The bank of Japan ensured that it will do everything to bring back the inflation to 2%. All the economic policies taken by Mr. S is referred as Abenomics.

Appreciation of a Currency:

It is referred as the increase in the value of a currency in comparison to other currencies. Consider a situation in which the value of one dollar is equal to INR 50. When it becomes equal to INR 60, it means the dollar has appreciated in comparison to INR.

Depreciation of a Currency:

It is referred as the decrease in the value of a currency in comparison to other currencies. Consider a situation in which the value of one dollar is equal to INR 50. When it becomes equal to INR 40, it means the dollar has depreciated in comparison to INR.

To explain: Reason behind a weaker yen being profitable to Japanese auto companies.