Explain how, according to the purchasing power parity theory, exchange rates will adjust if infl ation in the United States is 3 percent and infl ation in Japan is 1 percent. How do spot markets...

Explain how, according to the purchasing power parity theory, exchange rates will adjust if infl ation in the United States is 3 percent and infl ation in Japan is 1 percent.

How do spot markets differ from forward markets? How do spot markets differ from futures markets?