How does the law of one price adjust exchange rates when inflation in a commodity product like say gold is higher in country A than in country B? Refer to supply and demand of both goods and services and currency. Clarify also whether real or nominal exchange rates adjust, or both.

ENGR.ECONOMIC ANALYSIS
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b. How does the law of one price adjust exchange rates when inflation in a
commodity product like say gold is higher in country A than in country B?
Refer to supply and demand of both goods and services and currency. Clarify
also whether real or nominal exchange rates adjust, or both.
Transcribed Image Text:b. How does the law of one price adjust exchange rates when inflation in a commodity product like say gold is higher in country A than in country B? Refer to supply and demand of both goods and services and currency. Clarify also whether real or nominal exchange rates adjust, or both.
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