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

Quizplus · Accepted Answer

With a higher inflation rate in the U.S. than Japan, we expect the value of the dollar to decrease relative to the yen. Therefore, we can expect to receive fewer yen for $1 next year, leading to the answer of less than 100 yen.

Assume You Can Currently Exchange $1 for ¥100