1.3 suppose consumers in Canada and Germany only consume velvet shirts (which are traded) and legal services which are not traded). The prices of those goods in each country for two years are given in the table below. All prices are quoted in the currency of the relevant country. Year Shirts in Canada ($) 50 60 Legal services in Canada ($) 15 18 Shirts in Germany Legal services in IE) Germany (E) 40 14 43 2017 2018 14,34 Assume that Canadians spend 80% of their consumption expenditures on shirts while Germans spend 60% of their consumption expenditures on shirts. Assume that the nominal exchange rate is such that the Law of One Price holds for traded goods in every year. Fill the table below by determining the nominal exchange rate ($ per ) in each year, the Consumer price index (CPI) in each country in each year, and the real exchange rate in each year (show your work in the cells) (8) a. Real Exchange rate Year German CPI (Euro ) (se) Nominal Exchange Canadian CPI rate (Es/E) ($) 2 2017 kui 40+1)x0.8, (40+14)%0.6 7V2=E&Texte -0-1-25 =$52 : 1.25 X 124 El Pet 660t18)X0.8 (43+14.34%0.6 - 1.35 $62-4 84.404 =2.13 -&632-4 5-2.01 . 1.395x34404 42 2018 b. Does absolute purchasing power parity hold? How do you know? (1) .PL absolute Ppp = EVE No, because the abigme. purchaing power parity only "calculate the tradeable goods. these are