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Suppose an identical iPhone is sold for $ = $1,500 in Canada and = 200,000 in Japan. There are no trade barriers or transaction costs.

Suppose an identical iPhone is sold for $ = $1,500 in Canada and = 200,000 in Japan. There are no trade barriers or transaction costs. The nominal exchange rate is currently at = 120/$. Assume prices and nominal exchange rate are flexible. Use two properly labeled graphs to help you explain the stepby-step adjustment process for these markets to yield the Law of One Price result.

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