Discuss the relationship between ppp and law of one price, International Economics

Assignment Help:

Discuss the relationship between PPP and the Law of One Price.

Answer:  The law of one price is applies to individual commodities while Purchasing Power Parity applies to the general price level.

Proponents of Purchasing Power Parity argue that its validity in the long run does not require the law of one price to hold exactly.  When goods and services provisionally become more expensive in one country than in others the demands for its currency and its products reduce pushing the exchange rate and domestic prices back in line with Purchasing Power Parity and vice versa.

 


Related Discussions:- Discuss the relationship between ppp and law of one price

Explain the partial globalization of international finance, Explain the Par...

Explain the Partial Globalization of International Finance

Rasons for economic miracle of east asian countries, Q. Illustrate the rea...

Q. Illustrate the reasons for the economic "miracle" of the East Asian countries between 1960 and 1997. Is it only due to the common Asian practice of industrial policy and busin

How to keep the exchange rate fixed, Q. If the central bank does not purcha...

Q. If the central bank does not purchase foreign assets when output increases but instead holds the money stock constant, can it still keep the exchange rate fixed at E 0 ? An

Demand for a countrys exports, Q. Using the GG - LL framework, analyze the ...

Q. Using the GG - LL framework, analyze the effect of an increase in the size and frequency of sudden shifts in the demand for a country's exports. Answer: Such a alter pus

Nature and basis of international trade, discus how every economy is essent...

discus how every economy is essentially part of the international economy

How much steel could the firm sell domestically, Q . While selling exports...

Q . While selling exports it could also maximize its domestic sales by equating its marginal (opportunity) cost to its marginal revenue of $5. How much steel could the firm sell

International trade, #question.what is the baises for international trade.

#question.what is the baises for international trade.

Resarch paper, i need to do term paper international economics related. the...

i need to do term paper international economics related. the paper have to be empirical paper. Writing an Empirical Paper in APA Style 1- Title Page 2- Abstract 3- Introduction 4-

Assignment help, hi can you help me do my assignment?

hi can you help me do my assignment?

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd