The recent commitment of most automotive brands to the electric vehicle market has led to an increase in global demand for semiconductor chips. Assuming that Japan is the only semiconductor supplier in the world, and the central bank adopts tight monetary policy to fight against inflation due to the rising inflation, determine what will happen to the demand for yen, the supply of yen and the exchange rate of yen to the dollar in the foreign exchange market. Explain your answer.

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The recent commitment of most automotive brands to the electric
vehicle market has led to an increase in global demand for
semiconductor chips. Assuming that Japan is the only semiconductor
supplier in the world, and the central bank adopts tight monetary
policy to fight against inflation due to the rising inflation,
determine what will happen to the demand for yen, the supply of yen
and the exchange rate of yen to the dollar in the foreign exchange
market.

Explain your answer.

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