Question: In each of the following scenarios, suppose that the two nations are the only trading nations in the world. Given inflation and the change in the nominal exchange rate, which nation's goods become more attractive?
a. Inflation is 10% in the United States and 5% in Japan; the U.S. dollar-Japanese yen exchange rate remains the same.
b. Inflation is 3% in the United States and 8% in Mexico; the price of the U.S. dollar falls from 12.50 to 10.25 Mexican pesos.
c. Inflation is 5% in the United States and 3% in the euro area; the price of the euro falls from $1.30 to $1.20.
d. Inflation is 8% in the United States and 4% in Canada; the price of the Canadian dollar rises from US$0.60 to US$0.75.