225. In a world with two products, wheat (W) and coffee (C), nation Alpha produces wheat and nation Beta produces coffee. Nation Alpha prefers an exchange rate of 1W = 2C, and nation Beta prefers an exchange rate of 1W = 1C. The exchange rate preferred by nation

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The exchange rate preferred by nation Beta (1W = 1C) will prevail if world demand for coffee is great relative to its supply. This is because nation Beta specializes in producing coffee, and as demand for coffee increases, the value of coffee will increase relative to wheat. As a result, other nations will be willing to pay more for coffee, causing the exchange rate to shift in favor of nation Beta. Nation Alpha's preference for an exchange rate of 1W = 2C is less likely to prevail in this scenario because their product (wheat) is not in as high demand.

225 in a World with Two Products, Wheat (W) and Coffee