1. (Nontradable Goods and PPP) In countries A and B, households consume only wheat and haircuts. Wheat is internationally traded, whereas haircuts are not. In country A, a ton of wheat is 10 times as expensive as a haircut, while in country B it is only 5 times as expensive. The consumer price index in country 2' = A, B denoted B, is Pi = (PiW)0'25(PiH)O'75, where BW and P? denote the prices of wheat and haircuts in country i. (a) Calculate the real exchange rate between countries A and B. (b) Which country is more expensive and why