Assume that a Japanese car manufacturer exports cars to U.S. dealerships, which

Question

Assume that a Japanese car manufacturer exports cars to U.S. dealerships, which are priced in yen. The demand for those cars declines when the yen is strong. The manufacturer also produces some cars in the U.S. with U.S. materials and those cars are priced in dollars. The manufacturer could reduce its economic exposure by:
a. closing down most of its plants in the U.S.
b. producing more automobiles in the U.S.
c. relying completely on Japanese suppliers for its parts.
d. pricing its exports in dollars.

Explanation / Answer

Correct answer is c. relying completely on Japanese suppliers for its parts. Because For many years, export promotion was a large issue in Japanese government policy. Government officials recognized that Japan needed to import to grow and develop, and it needed to generate exports to pay for those imports. After 1945, Japan had difficulty exporting enough to pay for its imports until the mid-1960s, and resulting deficits were the justification for export promotion programs and import restrictions.

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