Question 3. (20 points) Inflation vs. exchange rate: For each of questions 3.1 through 3. below, please write your answers in the answer template sheet (though you may need to d calculations, but do not need to show any calculation in the template sheet). There are two producer countries (U.S. and Japan), and one consumer country (Luxemb The U.S. produces American rice and Napa wine, Japan produces Japanese rice and Jap wine (sak). The local prices of products (that is, the price given in terms of the curren producer of the product) are assumed constant (do not change over time) and are as fo pound of American rice = 5 USD; 1 bottle of Napa wine = 12 USD. pound of Japanese rice = 600 JPY; 1 bottle of Japanese wine = 1000 JPY. Every year, a Luxembourg household needs to consume a basket which consists of 1 pound of rice and 1 bottle of wine to be happy. The Luxembourg household only uses their officabile currency EUR to buy products, and always chooses to buy the cheapest products available for their consumption needs. We refer to the price of a consumption basket as the price level. In 2019, the exchange rates were as follows: 1 USD - 100JPY 1 EUR 3.1 (6 points): What was the Luxembourg price level (in terms of EUR) in 2019? 3.2 (7 points): In 2020, the exchange rates were as follows: 1 USD - 150 JPY - I EUR What was the Luxembourg price level (in terms of EUR) in 2020? Was there an inflation or deflation from 2019 to 2020 in Luxembourg? In percentage points, what was this inflation (or deflation) rate from 2019 to 2020 in Luxembourg? 3.3 (7 points): In 2021, the exchange rates were as follows: 0.80 USD - 100 JPY - 1 EUR What was the Luxembourg price level (in terms of EUR) in 2021? Was there an inflation or deflation from 2019 to 2021 in Luxembourg? In percentage points, what was this inflation (or deflation) rate from 2019 to 2021 in Luxembourg? Question 3. (20 points) Inflation vs. exchange rate: For each of questions 3.1 through 3. below, please write your answers in the answer template sheet (though you may need to d calculations, but do not need to show any calculation in the template sheet). There are two producer countries (U.S. and Japan), and one consumer country (Luxemb The U.S. produces American rice and Napa wine, Japan produces Japanese rice and Jap wine (sak). The local prices of products (that is, the price given in terms of the curren producer of the product) are assumed constant (do not change over time) and are as fo pound of American rice = 5 USD; 1 bottle of Napa wine = 12 USD. pound of Japanese rice = 600 JPY; 1 bottle of Japanese wine = 1000 JPY. Every year, a Luxembourg household needs to consume a basket which consists of 1 pound of rice and 1 bottle of wine to be happy. The Luxembourg household only uses their officabile currency EUR to buy products, and always chooses to buy the cheapest products available for their consumption needs. We refer to the price of a consumption basket as the price level. In 2019, the exchange rates were as follows: 1 USD - 100JPY 1 EUR 3.1 (6 points): What was the Luxembourg price level (in terms of EUR) in 2019? 3.2 (7 points): In 2020, the exchange rates were as follows: 1 USD - 150 JPY - I EUR What was the Luxembourg price level (in terms of EUR) in 2020? Was there an inflation or deflation from 2019 to 2020 in Luxembourg? In percentage points, what was this inflation (or deflation) rate from 2019 to 2020 in Luxembourg? 3.3 (7 points): In 2021, the exchange rates were as follows: 0.80 USD - 100 JPY - 1 EUR What was the Luxembourg price level (in terms of EUR) in 2021? Was there an inflation or deflation from 2019 to 2021 in Luxembourg? In percentage points, what was this inflation (or deflation) rate from 2019 to 2021 in Luxembourg
