Assume that the United States and the United Kingdom produce only one good, wheat. Suppose the price of wheat is $3.25 in the United States and 1.35 in the United Kingdom.

(a) According to the Law of One Price, what should the spot exchange rate ( $/ ) be?

(b) Assume the U.S. government imposes a tariff of $0.50 per bushel on wheat imported from the United Kingdom. What is the spot exchange rate ( $/ ) that ensures no arbitrage?

(c) Based on your answer b), does the British pound appreciate or depreciate to keep any investor indifferent after the introduction of the tariff?