If over the next year the price level in Turkey increases and the price level in Japan falls, then the Turkish lira should depreciate relative to the Japanese Yen.

Question

Quizplus · Accepted Answer

If the price level in a country increases, its currency tends to depreciate relative to other currencies. Similarly, if the price level falls in a country, its currency tends to appreciate relative to other currencies. Therefore, if the price level in Turkey increases and the price level in Japan falls, the Turkish lira should depreciate relative to the Japanese yen.

If Over the Next Year the Price Level in Turkey