Assume That U

question 25

Multiple Choice

Assume that U.S. annual inflation equals 8%, while Japanese annual inflation equals 5%. If purchasing power parity is used to forecast the future spot rate, the forecast would reflect an expectation of:

• A) appreciation of yen's value over the next year.
• B) depreciation of yen's value over the next year.
• C) no change in yen's value over the next year.
• D) information about interest rates is needed to answer this question.

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Definitions:

Voters

Individuals who are eligible and participate in the process of electing leaders or deciding on public policy issues.

Government Activity

Actions or operations carried out by the government in order to provide public goods and services, regulate the economy, and support societal welfare.

Rent-Seeking Activity

The practice of gaining economic advantage without reciprocating any benefits back to society through wealth creation.

Redistribute Income

The transfer of income from certain individuals or groups to others through mechanisms like taxes and welfare programs aimed at lessening income inequality.