5. Purchasing power parity The law of one price The theory of purchasing power party...
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5. Purchasing power parity The law of one price The theory of purchasing power party (PPP) states that in the long-run exchange rates between two countries adjusts so that the price of an identical good is the same when expressed in the same currency. A scanner costs 65.45 in England. The spot rate is currently $1.9734 per pound. TURE Sot ASS 2011 Assuming that PPP holds true, what is the price of the scanner in the United States? O $103.33 $39.80 O $135.62 $129.16 Suppose the price of the scanner in the United States was actually $112.08. Assuming no transaction costs, transportation costs, or import restrictions, what does Ppp predict would happen to the demand for the scanner in the United States? The demand for the scanner would increase in the United States. The demand for the scanner would decrease in the United States
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