11 If a bundle of goods costs 2000000 and the same bundle of

11 If a bundle of goods costs ¥2,000,000 and the same bundle of goods costs $20,000 in the US and over the next year inflation in Japan is 7% and 12% in the US, if purchasing power parity holds, which of the following is true over the next year? Select one: a. There is not enough information to determine b. The dollar will appreciate relative the yen c. There is no change in the value of the dollar relative to the yen. d. The dollar will depreciate relative the yen

Current exchange rate = 2000000/ 20000 = Yen 10 per $

Rate after one year = 10(1+.07)/(1+.12) = Yen 9.55357 per $

The one $ that cost yen 10is now equivalent to 9.55357 yen after one year .it means $ has depreciated against yen .

correct option is \" D\"

11 If a bundle of goods costs ¥2,000,000 and the same bundle of goods costs $20,000 in the US and over the next year inflation in Japan is 7% and 12% in the US,

11 If a bundle of goods costs 2000000 and the same bundle of

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