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The Nominal Exchange Rate Is 32 Russian Rubles Per Dollar

question 145

Essay

The nominal exchange rate is 32 Russian rubles per dollar. The price of a bushel of wheat is 260 rubles in Russia and $7 in the U.S.
A. What is the real exchange rate? Show your work.
B. Can arbitragers make a profit?
C. If your answer to B is yes, where would arbitragers buy and where would they sell.


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