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Why does purchasing power parity hold in this example

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Reference no: EM133289285

Assignment:

Suppose that you wake up one morning and find the following exchange rates: $1 = ¥100 ¥1 = €0.05 €1 = $0.20

a. Given these exchange rates, can you profit from international arbitrage? Show and explain.

b. Does Purchasing Power Parity hold in this example? Why or why not?

Reference no: EM133289285

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