Real Economic Activity and Misery. Use the table

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containing economic, financial, and business indicators to answer the following questions. Calculate the country's Misery Index (unemployment + inflation) and then use it like interest differentials to forecast the future spot exchange rate, one year into the future.

Misery Index (inflation+unemployment)

Austrailia = 6.5% = 2.4% + 4.1%

JPN = 3.9% = 0% + 3.9%

U.S. = 7.4% = 2.7% + 4.7%

a. Japanese yen/U.S. dollar exchange rate in one year

b. Japanese yen/Australian dollar exchange rate in one year

c. Australian dollar/U.S. dollar exchange rate in one year

Forecasting the Pan-Pacific Pyramid: Australia, Japan, and the United States
											Industrial			Unemployment
		Gross Domestic Product									Production			Rate
						Forecast		Forecast
Country		Latest Qtr		Qtr		2015e		2016e			Recent Qtr			Latest
Australia		4.5	%	3.8	%	4.3	%	3.4	%		4.2	%		4.1
Japan		2.2	%	-1.5	%	2.2	%	2.5	%		4.9	%		3.9
United States		2.6	%	4.5	%	2.2	%	2.6	%		1.9	%		4.7
		Consumer Prices									Interest Rates
						Forecast					3-month			1-yr Govt
Country		Year Ago		Latest		2015e					Latest			Latest
Australia		4.9	%	2.9	%	2.4	%				6.83	%		6.23
Japan		0.8	%	-0.3	%	0	%				0.62	%		1.63
United States		2.6	%	2.4	%	2.7	%				4.53	%		4.56
		Trade
		Balance			Current Account						Current Units (per US$)
		Last 12 mos			Last 12 mos			Forecast 15
Country		(billion $)			(billion $)			(% of GDP)			Oct 17th			Year Ago
Australia		-13.1			-46.2			-5.8	%		1.11			1.35
Japan		98.9			197.4			4.6	%		116			121
United States		-810.7			-793.2			-5.4	%		1			1
Note: Unless otherwise noted, percentages are percentage changes over one year. Rec Qtr = recent quarter. Values for 2015e are estimates or forecasts.