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The dollar-yen exchange spot rate in the foreign exchange market is $0.011 per yen.The value of a representative basket of goods and services consumed in
The dollar-yen exchange spot rate in the foreign exchange market is $0.011 per yen.The value of a representative basket of goods and services consumed in the United States is $1,000.The value of a representative basket of goods and services consumed in Japan is 100,000.(a) What is the real dollar-yen exchange rate?(b) Is the spot-rate of the dollar overvalued, undervalued or neither versus the yen?If, over or undervalued, please calculate the percentage of the mis-valuation.(Hint: The answer stated as a percentage is a round number.)
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