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If the annual inflation rates are 0.5% in Japan and 1.5% in US and the spot exchange rate is 110 yen per dollar will the

If the annual inflation rates are 0.5% in Japan and 1.5% in US and the spot exchange rate is 110 yen per dollar will the exchange rate expected to increase or decrease over a year? Assume relative PPP holds and note that the exchange rate is stated in indirect terms.

Increase (Yen depreciates against the dollar)

Decrease (Yes appreciates against the dollar)

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