Given the following data about two countries, A and B:

	Weight in index for country :		Current Index level for country
	A	B	A	B
Food	.22	.35	84	174
Other Goods	.32	.41	77	233
Services	.46	.24	286	122
	1.00	1.00

The base year is 1990 = 100, at which time the exchange rate was A1.00 = B2.50 (where A and B are also the names of the currencies of the two countries).

Answer each of the following questions under two alternative scenarios: including and excluding services (i.e. treating them first as relevant to PPP, then as irrelevant nontradeables).

(a) What are the current price indices for the two countries?

(b) What is the current PPP exchange rate?

(c) If the exchange rate is actually A1.00 = B2.85, what is the real exchange rate?

Compare and explain your answers including and excluding services.