According to PPP theory,the yen price of the dollar would fall in a year from 140 to 132 yen if along with a Japanese inflation rate of 2 percent,the U.S.inflation rate is ________ percent.

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The Purchasing Power Parity (PPP) theory suggests that exchange rates will adjust to compensate for inflation differentials between two countries. If the Japanese inflation rate is 2%, and the yen price of the dollar falls from 140 to 132 yen, this implies the dollar has depreciated relative to the yen. To find the U.S. inflation rate that would cause this under PPP, we can use the formula: (1 + US inflation rate) / (1 + Japanese inflation rate) = (Initial exchange rate / Final exchange rate). Plugging in the given values: (1 + US inflation rate) / (1 + 0.02) = 140 / 132. Solving for the US inflation rate gives approximately 7.71%.

According to PPP Theory,the Yen Price of the Dollar Would