Assume you can currently exchange one U.S.dollar for one hundred Japanese yen.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 one U.S.dollar next year?

Question

Quizplus · Accepted Answer

With a higher inflation rate in the U.S. compared to Japan, the value of the U.S. dollar is expected to decrease relative to the Japanese yen. Therefore, we can expect to receive less than 100 yen for one U.S. dollar next year, making option E the best choice.

Assume You Can Currently Exchange One U