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2. The inflation rate in the USA is 5 percent while the inflation rate in Japan is 10 %. The current exchange rate for the

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2. The inflation rate in the USA is 5 percent while the inflation rate in Japan is 10 %. The current exchange rate for the Japanese yen () is $0.0075. After supply and demand for the Japanese yen have adjusted in the manner suggested by purchasing power parity, the new exchange rate for the yen will be? Briefly explain the PPP theory. 15 points

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