Purchasing-power parity holds between the nations of Ectenia and Wiknam, where the only commodity is Spam. a.

Question:

Purchasing-power parity holds between the nations of Ectenia and Wiknam, where the only commodity is Spam.
a. In 2000 a can of Spam costs 2 dollars in Ectenia and 6 pesos in Wiknam. What is the between Ectenian dollars and Wiknamian pesos?
b. Over the next 20 years, inflation is 3.5 percent per year in Ectenia and 7 percent per year in Wiknam. What will happen over this period to the price of Spam and the
c. Which of these two nations will likely have a higher nominal interest rate? Why?
d. A friend of yours suggests a get-rich-quick scheme: Borrow from the nation with the lower nominal interest rate, invest in the nation with the higher nominal interest rate, and profit from the interest-rate differential. Do you see any potential problems with this idea? Explain.

Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...