During 2011,the Price Level in the U

question 42

Multiple Choice

During 2011,the price level in the U.S.rose at a faster rate than the price level in Japan.Other things the same,according to purchasing-power parity,this difference in inflation rates should have caused

• A)the nominal exchange rate of the dollar to appreciate relative to the yen.
• B)the real exchange rate of the dollar to appreciate relative to the yen.
• C)the nominal exchange rate of the dollar to depreciate relative to the yen.
• D)the real exchange rate of the dollar to depreciate relative to the yen.

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Definitions:

Non-Monetary Items

Items that are measured at historic cost rather than their current monetary value, such as property, plant, and equipment.

Functional Currency

The currency of the primary economic environment in which an entity operates, usually the local currency or the currency of the country where it primarily generates and expends cash.

Fair Value

The proceeds from selling an asset or the financial burden of a liability transfer in a civilized negotiation with market participants on the valuation date.

Functional Currency

The main currency used by a business or in an economy, often the domestic currency or the currency of the primary economic environment in which the entity operates.