Assume a system of floating exchange rates Due to a high sav

Assume a system of floating exchange rates. Due to a high savings rate, suppose the level of savings in Japan is in excess of domestic investment needs. If Japanese residents invest abroad, the yen\'s exchange value will and the Japanese trade balance will move toward a O appreciate; deficit O appreciate; surplus depreciate; deficit O depreciate; surplus

Solution

As Japenese Yen will get converted into any foreign currency which will depreciate the value of Yen and this will provide positive trade balance.

Hence Japanese yen will depreciate and Trade balance will be in Surplus.

Option D is correct response.