If the Real Exchange Rate Between the United States and Japan

question 68

Multiple Choice

If the real exchange rate between the United States and Japan remains unchanged, and the inflation rate in the United States is 6 percent and the inflation rate in Japan is 3 percent, the:

• A) dollar will appreciate by 3 percent against the yen.
• B) yen will appreciate by 3 percent against the dollar.
• C) yen will appreciate by 6 percent against the dollar.
• D) yen will appreciate by 9 percent against the dollar.

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Definitions:

Expected Income

The income an individual anticipates to earn in the future based on current circumstances, potential investments, and employment prospects.

Utility Maximizer

An economic agent who seeks to achieve the highest level of satisfaction or utility from their choices, given their constraints.

Probability

A rating of the potential occurrence of an event, depicted on a scale from 0 to 1.

Expected Income

The income an individual or business anticipates to receive over a certain period.