1. If the US and Japan both initially have 2% inflation, and then US inflation increases to 5% A. Explain what should happen to the $/yen exchange rate in one year B. Suppose the initial exchange rate S0 is $0.0152/= then approximately what is the new exchange rate in one year predicted by purchasing power parity? 2. Annual inflation rates in the U.S. and Chile (currency code CLP) are expected to be 4% and 6% respectively. If the current exchange rate is $0.1250/CLP, then approximately what is the PPP predicted spot rate (A) In 1 year and (B) in 3 years? 3. Repeat \#2 using the exact form prediction