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Real exchange rate between canada and russia

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Reference no: EM132274752

Assume that Canadian wheat sells for $100 per bushel, Russian wheat sells for 1600 rubles per bushel, and the nominal exchange rate is 4 rubles per dollar.

a. Explain how you could make a profit from this situation. What would be your profit from this situation. What would be your profit per bushel of wheat? if other people exploit the same opportunity, what would happen to the price of wheat in Russia and the price of wheat in Canada?

b. Suppose that wheat is the only commodity in the world. What would happen to the real exchange rate between Canada and Russia?

Reference no: EM132274752

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