Suppose the price of a digital camera in Australia is $200 and 22 000 yen in Japan.If the current exchange rate is 100 yen to the dollar,then purchasing power parity theory would predict that in the long run

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According to the purchasing power parity theory, in the long run, the exchange rate will adjust to equalize the prices of goods between countries. In this case, the camera costs 22,000 yen in Japan, which is equivalent to $220 in the US (since 100 yen = $1). However, the actual price of the camera in the US is $200. This suggests that the Japanese yen is overvalued relative to the US dollar. Therefore, purchasing power parity theory would predict that the yen will depreciate relative to the dollar to bring the price of the camera in Japan in line with that in the US.

Suppose the Price of a Digital Camera in Australia Is