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Assume purchasing power parity holds now and in a year. Identical goods (with no transportation costs) cost $200 (USD) in the United States and 20,000

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Assume purchasing power parity holds now and in a year. Identical goods (with no transportation costs) cost $200 (USD) in the United States and 20,000 yen (JPY) in Japan. In the next year, the Japanese economy experiences a 5% inflation rate and the U.S. economy experiences a 10% inflation rate. Assuming all else equal, which of the following is true about the JPY:USD exchange rate today and in a year: The original exchange rate was 100:1 an did not change a year later The original exchange rate was 100:1 and moved to 95:1 The original exchange rate was 100:1 and moved to 105:1 The original exchange rate was 105:1 and moved to 100:1

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