Multiple Choice
Suppose the price of a mobile phone in Australia is $400 and 30 000 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:
A) the yen will depreciate relative to the dollar.
B) the yen will appreciate relative to the dollar.
C) the value of the yen relative to the dollar will not change.
D) both the yen and the dollar will appreciate.
Correct Answer:
Verified
Correct Answer:
Verified
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