question archive Assume that American rice sells for $ 100 per bushel, Japanese rice sells for 16,000 yen per bushel, and the nominal exchange rate is 80 yen per dollar
Assume that American rice sells for $ 100 per bushel, Japanese rice sells for 16,000 yen per bushel, and the nominal exchange rate is 80 yen per dollar
Subject:EconomicsPrice: Bought3
Assume that American rice sells for $ 100 per bushel, Japanese rice sells for 16,000 yen per bushel, and the nominal exchange rate is 80 yen per dollar.
a. Explain how you could benefit from this situation. What is your profit per bushel of rice? If other people took advantage of the same opportunity, what would the price of rice be like in Japan and the price of rice in the United States?
b. Suppose rice is the only commodity in the world. What will happen to the real exchange rate between the United States and Japan?
