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Suppose that on January 1, the price of one hundred yen was $0.80 and PPP held. Over the year, the Japanese inflation rate was 5 percent and the U.S. inflation rate was 10 percent. If the exchange rate at the end of the year was $0.90, does the yen appear to be overvalued, undervalued, or at the PPP level? describe your answer.

Microeconomics, Economics

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