8. Assume from base price levels of 100 in 2006, Japanese and U.S. price levels in 2007 stood at 102 and 106 respectively. (Price levels were measured using the consumer price index.) a. If in 2006 $ per y exchange rate was $0.01064, what should the exchange rate be in 2007 if the purchasing power parity holds? (4%) b. In fact, the exchange rate in 2007 was #1 = $0.01027. What might account for the discrepancy? Explain. (4%)