Answered

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Assume the exchange rate for the japanese yen is currently 110 yen = 1 u.s. dollar (right-column exchange rate). This is expected to change to 100 yen = 1 u.s. dollar over the next 180 days, as reflected by the forward rate. Based on the relative purchasing power parity, would you expect the inflation rate to move higher or lower in japan over the 180 days, relative to inflation in the u.s.?
A. Higher
B. Lower

Sagot :

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