Assume that Canadian wheat sells for $100 per bushel, Russianwheat sells for 1600 rubles per bushel,...

 

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Assume that Canadian wheat sells for $100 per bushel, Russianwheat sells for 1600 rubles per bushel, and the nominal exchangerate is 4 rubles per dollar. a) Explain how you could make a profit fromthis situation. What would be your profit per bushelof wheat? If other people exploit the same opportunity, whatwould happen to the price of wheat in Russia and the price of wheatin Canada? b) Suppose that wheat is the only commodity in theworld. What would happen to the real exchange rate between Canadaand Russia? Assume that Canadian wheat sells for $100 per bushel, Russianwheat sells for 1600 rubles per bushel, and the nominal exchangerate is 4 rubles per dollar. a) Explain how you could make a profit fromthis situation. What would be your profit per bushelof wheat? If other people exploit the same opportunity, whatwould happen to the price of wheat in Russia and the price of wheatin Canada? b) Suppose that wheat is the only commodity in theworld. What would happen to the real exchange rate between Canadaand Russia?

Answer rating: 100% (QA)

With nominal exchange rate of 4 rubles per dollar that is 1 4 rubles or 1 ruble 14 So the price of C... View the full answer