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Relative Price Changes and Currency Value
An American tourist is planning a trip to Japan. A year ago, they noticed that a specific high-end camera cost $1,000 in the United States, and an equivalent camera in Japan, after converting the yen price to dollars, also cost $1,000. This year, they observe that the same camera still costs $1,000 in the U.S., but the equivalent camera in Japan, after converting the yen price to dollars, now costs $1,150. Based only on this change in the relative cost of goods, has the U.S. dollar experienced a real depreciation or a real appreciation relative to the Japanese yen? Justify your answer.
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