Exercise 6 (+additional question) in Mankiw:

Problem 5.10: The nominal interest rate is 12 percent per year in Canada and 8 percent per year in the USA. Suppose that the real interest rate is the same in these two countries, and that purchasing-power parity holds. A. Use the Fischer equation (discussed in chapter 4.) what can you say about expected inflation in Canada and in the USA? B. ................
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