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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