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 make a profit from this situation What would be your profit per bushel of rice If other people exploit the same opportunity,...

a To make a profit you would want to buy rice where it is cheap and sell it where it is expensive ...

Assume that American rice sells for $100 per bushel, Japanese rice sells for 16,000 yen per bushel,

Question:

Assume that American rice sells for $100 per bushel, Japanese rice sells for 16,000 yen per bushel, and the nominal is 80 yen per dollar.
a. Explain how you could make a profit from this situation. What would be your profit per bushel of rice? If other people exploit the same opportunity, what would happen to the price of rice in Japan and the price of rice in the United States?
b. Suppose that rice is the only commodity in the world. What would happen to the real between the United States and Japan?

Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...