QUESTION 7 Use the following information to answer the next two questions. Investors expect inflation rates over the next twelve months in Japan and Australia to be 3% and 8%, respectively. The current exchange rates for the two currencies are as follows: .0085USD/, 79AUD/USD Suppose that twelve months from now, the exchange rate between Australian dollars (AUD) and yen is .0075AUDA. According to relative PPP, what impact would this new exchange rate have on Australia's balance of trade? (Assume Australia is the home country.) Round intermediate steps to four decimals. Australia's BOT will decrease Australia's BOT will increase Australia's BOT will be unaffected by the new exchange rate. None of the above QUESTION 8 What should have been the percentage change in direct quotes according to realtive PPP? 0.05 -.0463 .0485 0-05