9. Let us consider a utopian world in which there are only three goods: sake sets. Japanese consume only a locally produced food, called sake, and an i ndustri produced and traded good, called TV sets. Americans consume only a locally produced food, called beer, and an indus TV sets are produced in both countries and actively traded; their local prices fol the law of one price. Foods are produced only locally and are not traded. The con sumption basket of a Japanese individual consists of two-thirds sake and one-third sets. The consumption basket of an American consists of one-half beer and onehal produced and traded good, called TV sets. aedn bothcountries and activelyllv and are not t T TV sets. Prices of beer and TV sets in the United States are constant over time in U.S. dollars. Japanese are very competitive and export a lot of TV sets. Japanese farm ers want to share in the increased national wealth, and the price of sake is rising at a rate of 10 percent per year in yen. Assume that the yen/dollar exchange rate stays constant. a. What is the consumer price index inflation in Japan? b. Does relative PPP hold between Japan and the United States? 9. Let us consider a utopian world in which there are only three goods: sake sets. Japanese consume only a locally produced food, called sake, and an i ndustri produced and traded good, called TV sets. Americans consume only a locally produced food, called beer, and an indus TV sets are produced in both countries and actively traded; their local prices fol the law of one price. Foods are produced only locally and are not traded. The con sumption basket of a Japanese individual consists of two-thirds sake and one-third sets. The consumption basket of an American consists of one-half beer and onehal produced and traded good, called TV sets. aedn bothcountries and activelyllv and are not t T TV sets. Prices of beer and TV sets in the United States are constant over time in U.S. dollars. Japanese are very competitive and export a lot of TV sets. Japanese farm ers want to share in the increased national wealth, and the price of sake is rising at a rate of 10 percent per year in yen. Assume that the yen/dollar exchange rate stays constant. a. What is the consumer price index inflation in Japan? b. Does relative PPP hold between Japan and the United States