Real exchange rates, Consider each of the following goods

Real exchange rates

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Reference no: EM13998390

Real Exchange Rates

Consider each of the following goods and services. For each, identify whether the law of one price will hold, and state whether the relative price, q g US/Foreign, is greater than, less than, not equal to 1, or equal to 1. Explain your answer in terms of the assumptions we make when using the law of one price.

(a) Rice traded freely in the United States and Japan

(b) Sugar traded in the United States and Mexico; the U.S. government imposes a quota on sugar imports into the United States.

(d) Haircuts in the United States and the United Kingdom.

Reference no: EM13998390

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