The beginning-of-the-year prices for a pair of boots are $50 in the United States and ¥8,000 in Japan. We know that prices in the United States and Japan will change over the coming year due to inflation. If we assume that inflation in the United States (our home country, inf_h) will be 4% and inflation in Japan will be 3% (our foreign country, inf_f), what will the price of the boots be at the end of the year?

Question

Quizplus · Accepted Answer

To find the new price of the boots in the United States, we can simply add the inflation rate (4%) to the original price ($50): 
$50 x 0.04 = $2 
$50 + $2 = $52 
So the new price for the U.S. boots is $52.

To find the new price of the boots in Japan, we need to convert the original price from yen to dollars, apply the inflation rate, and then convert back to yen. 
¥8,000 ÷ 107 = $74.77 (using an exchange rate of 107 yen per dollar) 
$74.77 x 0.03 = $2.24 
$74.77 + $2.24 = $77.01 
$77.01 x 107 = ¥8,239.9 (rounded to nearest yen)

Therefore, the new price for the Japanese boots is ¥8,240.

The correct answer is B) The U.S. boot price is $52 and the Japanese boot price is ¥8,240.

The Beginning-Of-The-Year Prices for a Pair of Boots Are $50