Purchasing Power Parity Forecasts. Use the table

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containing economic, financial, and business indicators to answer the following questions. Assuming purchasing power parity, and assuming that the forecasted change in consumer prices is a good proxy of predicted inflation, forecast the following exchange rates:

a. Japanese yen/U.S. dollar in one year

b. Japanese yen/Australian dollar in one year

c. Australian dollar/U.S. dollar in one year

The table below contains economic, financial, and business indicators from 2015:

Forecasting the Pan-Pacific Pyramid: Australia, Japan, and the United States
											Industrial			Unemployment
		Gross Domestic Product									Production			Rate
						Forecast		Forecast
Country		Latest Qtr		Qtr		2015e		2016e			Recent Qtr			Latest
Australia		4.9	%	3.8	%	4.2	%	3.3	%		4.6	%		4.3	%
Japan		1.8	%	-1.4	%	2.1	%	1.6	%		4.9	%		3.6	%
United States		2.8	%	3.9	%	2.1	%	2.6	%		1.8	%		4.5	%
		Consumer Prices									Interest Rates
						Forecast					3-month			1-yr Govt
Country		Year Ago		Latest		2015e					Latest			Latest
Australia		4.5	%	2.9	%	2.9	%				6.94	%		6.25	%
Japan		0.9	%	-0.2	%	0.0	%				0.68	%		1.62	%
United States		2.8	%	2.4	%	3.4	%				4.56	%		4.53	%
		Trade
		Balance			Current Account						Current Units (per US$)
		Last 12 mos			Last 12 mos			Forecast 15
Country		(billion $)			(billion $)			(% of GDP)			Oct 17th			Year Ago
Australia		-12.8			-46.9			-5.6	%		1.12			1.32
Japan		98.4			197.7			4.5	%		118.00			120.00
United States		-810.5			-793.8			-5.4	%		1.00			1.00
Note: Unless otherwise noted, percentages are percentage changes over one year. Rec Qtr = recent quarter. Values for 2015e are estimates or forecasts.

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