If over the next year the inflation rate in the euro area is higher than the inflation rate in Japan, then the euro should depreciate relative to the Japanese yen.

Question

Quizplus · Accepted Answer

If the inflation rate in the euro area is higher than the inflation rate in Japan, then the purchasing power of the euro will decrease relative to the Japanese yen. This will make the euro less valuable relative to the yen, and the euro should depreciate relative to the yen.

If Over the Next Year the Inflation Rate in the Euro