Discuss the relationship between PPP and the Law of One Price
What will be an ideal response?
The law of one price applies to individual commodities while PPP applies to the general price level.
Proponents of PPP argue that its validity in the long run doesn't require the law of one price to hold exactly. When goods and services temporarily become more expensive in one country than in others, the demands for its currency and its products falls, pushing the exchange rate and domestic prices back in line with PPP and vice versa.
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The principle that states that we should strive to achieve the greatest happiness for the greatest number is called
A) the big tradeoff. B) the symmetry principle. C) utilitarianism. D) efficiency.
When both internal and external costs for using a scarce resource are included, then there is
A) an increase in the production of the good. B) a negative externality. C) an increase in the price of the good. D) a positive externality.