1.what is the relationship between the exchange rates and relative inflation levels of the two countries? How will this relationship affect Blades' Thai revenue and costs given that the baht is freely floating? what is the net effect of this relationship on Blades?
2.what are some of the factors that prevent PPP from occurring in the short run? Would you expect PPP to hold better if countries negotiate trade arrangement under which they commit themselves to the purchase or of a fixed number of goods over a specified time period? Why or why not?
3.How do you reconcile the high level of interest rates in Thailand with the expected change of the baht-dollar exchange rate according to PPP?
4.Given Blades' future plans in Thailand, should the company be concerned with PPP? Why or why not?
5.PPP may hold better for some countries than for other. The Thai baht has been freely floating for more than a decade. How do you think Blades can gain insight into whether PPP holds for Thailand? Offer some logic to explain why the PPP relationship may not hold here.