The US uses the dollars as its currency and japan uses the yen as its currency . the table below gives information for the US and Japan for 2018. Money supplies are measured in national currencies. Real income is measured in bundles of output which are identical in the US and Japan. The money demand constant represents the proportion of nominal income that is held as money.

Money Supply, M^S. Real Income, Y. Money Demand Constant, k

U.S. . $ 500 billion 200 billion bundles 0.20

Japan 35,000 billion 250 billion bundles 0.10

A.Given the information in the table above, what is the purchasing power parity (PPP) exchange rate quoted as yen per dollar (/$)?

B.Suppose the exchange rate is currently 110/$. Using your answer in A, does the actual exchange rate conform to PPP, or does it overvalue or undervalue the yen?If the exchange rate does not conform to PPP, approximately how much is the yen overvalued or undervalued (in percent)?

C.Suppose that the purchasing power parity exchange rate calculated in A is achieved.If there is an economic expansion in the U.S., such that Y rises to 250 billion bundles, what are the long-run effects on the exchange rate?Briefly explain why.