Suppose Canadian Wheat Sells for $100 Per Bushel and Russian

question 144

Essay

Suppose Canadian wheat sells for $100 per bushel and Russian wheat sells for 2000 rubles per bushel.
a. If you believe that the purchasing-power parity theory holds, and if the current exchange rate is 16 rubles per dollar, would you expect the exchange rate to change? In what direction would it change?
b. If the current exchange rate is 16 rubles per dollar, how much is the real exchange rate, based on the prices of wheat?
c. If the exchange rate is 16, how could you make profit in this situation? How much profit per bushel could you make?

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Definitions:

Seatbelts

Safety devices designed to secure the occupant of a vehicle against harmful movement that may result during a collision or a sudden stop.

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Individuals in the transitional stage of physical and psychological development that typically occurs between puberty and adulthood.

Liver

A vital organ located in the upper right quadrant of the abdomen, involved in numerous metabolic processes including detoxification, protein synthesis, and digestion.

Mummy Restraint

A restraint technique used primarily in pediatric care where a child's arms and legs are wrapped securely to limit movement, often for medical procedures.