International finance

Suppose consumers in Canada and the United states only conethe late wedo chopp Und Haircuts, The peters those goods in each country for two years are given in the table betty All prices are quoted in the currency of the relevant country, Year Haircuts in US Shoes in Canada Haircuts in Canada Shoes in U.S (USD S) 2021 (CON $) (USD S) 100 (CDN $) 28 2022 120 30 80 28,67 35 85 For each year, the statistical agency in each country constructs a consumer price index which is a weighted average of the prices of the two goods in that country. The weights in the price indexes are given by the share of each good in the consumers' consumption baskets. Assume that Canadians spend 60% of their consumption expenditures on shoes while Americans spend 70% of their consumption expenditures on shoes. Assume that the nominal exchange rate is such that the Law of One Price holds for traded goods only in every year, a. Fill the table below by determining the nominal exchange rate (CDN$ per US$) 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) (6) Year Nominal Exchange Canadian CPI U.S. CPI Real Exchange rate (Econs/uss) (CDN $) (USD $ ) rate (9cdns/ uss) 2021 2022 b. Does absolute PP hold? How do you know? (1) C. Does relative purchasing power parity hold? How do you know? (1)