Question: Florin and Guilder are two countries separated by a narrow sea. They use currencies called, respectively, the Flop and the Gulp. Suppose the nominal exchange

Florin and Guilder are two countries separated by a narrow sea. They use currencies called, respectively, the Flop and the Gulp.
Suppose the nominal exchange rate is 10 Flops per Gulp.
A Guilderian trader buys a 150 Flop barrel of Florish pickles by exchanging 15 Gulps, and a Florish trader buys a 5 Gulp crate of Guilderian apples by exchanging 50 Flops.
Then the Gulp depreciates to 5 Flops per Gulp.

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