Assume you can currently exchange $1 for ¥100.Also assume the inflation rate will be 2.5 percent annually in the U.S.and 2 percent in Japan.Given these assumptions, how many yen should you expect in exchange for $1 next year?

Question

Assume you can currently exchange $1 for &yen;100.Also assume the inflation rate will be 2.5 percent annually in the U.S.and 2 percent in Japan.Given these assumptions, how many yen should you expect in exchange for $1 next year?

Quizplus · Accepted Answer

Based on the given inflation rates, the U.S. dollar will experience a greater decrease in value compared to the yen. This means that it will cost more dollars to buy the same amount of yen next year. Therefore, we can expect to receive less than 100 yen for $1 next year, making option E the correct answer.

Assume You Can Currently Exchange $1 for &Yen;100