Question
Suppose (imaginary) countries of Ambrosia and Bolumbia produces wheat. Assume Ambrosian wheat sells for Ambrosian$ (AMD) 100 per tonne, Bolumbian wheat sells for Bolumbian$ (BMD)
Suppose (imaginary) countries of Ambrosia and Bolumbia produces wheat. Assume Ambrosian wheat sells for Ambrosian$ (AMD) 100 per tonne, Bolumbian wheat sells for Bolumbian$ (BMD) 550 per tonne. The nominal exchange rate is 5 BMD per AMD.
Question: What would prevent the exchange rate from adjusting? (Hint: think about the limitations of PPP theory).
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The Rise And Fall Of Neoliberal Capitalism
Authors: David M Kotz
1st Edition
0674725654, 9780674725652
