If Inflation in Australia Is Higher Than Inflation in Japan

question 135

Multiple Choice

If inflation in Australia is higher than inflation in Japan, what will happen to the exchange rate between the Australian dollar and the Japanese yen in the long run, ceteris paribus?

• A)The dollar will appreciate against the yen.
• B)The dollar will depreciate against the yen.
• C)The dollar's value relative to the yen will not change.
• D)Both the dollar and the yen will appreciate.

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Definitions:

Fraternity Brothers

Male members of a fraternity, a social organization typically found in colleges and universities.

Primary Group

A small social group whose members share close, personal, enduring relationships.

Coterie

An exclusive group or circle of people with a shared interest or purpose, often characterized by a strong sense of unity or loyalty.

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A large, impersonal organization composed of many clearly defined positions arranged in a hierarchy. A bureaucracy has a permanent, salaried staff of qualified experts and written goals, rules, and procedures. Staff members always try to find ways of running the bureaucracy more efficiently.