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Consider two countries U and T with populations of (respectively) 100 and 25. In U the annual production is equal to 1000 tons of rice
Consider two countries U and T with populations of (respectively) 100 and 25. In U the annual production is equal to 1000 tons of rice and 50 haircuts. In T the annual production is 200 tons of rice and 10 haircuts. In U a haircut costs $30 and a ton of rice cost $2000. In T a haircut cost 300 TL (national currency of T) and a ton of rice cost 60.000 TL. The current USD to TL exchange rate is 30, i.e., 1 USD buys 30 TL. A) Is there any room for arbitrage in rice between U and T? Clearly explain why
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