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Assume that American rice sells for $100 per bushel, Japanese rice sells for 16,000 yen per bushel, and the nominal exchange rate is 80 yen per dollar. Suppose that rice is the only commodity in the world. What would happen to the real exchange rate between the United States and Japan?

Is it equal to 1? If not, can anyone please correct me and explain it to me?


THANKS A LOT!!!

  • eco -

    Based on commodities, then
    1 bushel= 1 bushel or
    100 dollars= 16000 yen.
    or 1 dollar= 160 yen

  • eco -

    Assume that American rice sells for $100 per bushel, Japanese rice sells for 16,000 yen per bushel, and the exchange rate is 80 yen per 1 dollar. Explain how you can make a profit in this situation. What would be your profit per bushel of rice?

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