What is the logic behind the theory of purchasing-power parity?
The logic behind purchasing-power parity is the law of one price, which asserts that a good must sell for the same price in all locations. If the price for a good is higher in one market than in another, someone can make a profit by purchasing the good where it is relatively cheap, and selling the good where it is relatively expensive. This process of arbitrage leads to an equalization of prices for the good in all locations. If purchasing power parity holds, the amount of dollars it takes to buy a good in the U.S. should buy enough foreign currency to buy the same good in a foreign country.
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Corrective taxes are more efficient than regulations for keeping the environment clean
a. True b. False Indicate whether the statement is true or false
Recall the Application about how the collapse of the housing boom and the worldwide recession of 2007 led to problems for some countries in the Euro-zone to answer the following question(s). When the euro was launched in 1999, the vision of its founders was to use the monetary union to further unify Europe economically and politically. They envisioned a large economic market, comparable to the United States with integrated goods and financial markets. They believed that by moving to a single currency with agreements on a number of fiscal rules that they could achieve economic stability and growth.Recall the Application. The European nations that adopted the euro as a common currency no longer have their own central banks and are therefore no longer able to conduct their own independent:
A. fiscal policy. B. monetary policy. C. international investment. D. trade policy.