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Assume That the United States Faces an 8 Percent Inflation

Question 95

Multiple Choice

Assume that the United States faces an 8 percent inflation rate while no (zero) inflation exists in Japan.According to the purchasing-power parity theory,the dollar would be expected to:


A) Appreciate by 8 percent against the yen
B) Depreciate by 8 percent against the yen
C) Remain at its existing exchange rate
D) None of the above

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