Question

Explain what is meant by ‘the law of one price’ and critically evaluate its perceived role...

Explain what is meant by ‘the law of one price’ and critically evaluate its perceived role in determining exchange rates

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

law of one price

law of one price is an economy theory that states that the price of any goods or service are equal when taking exchange rate into consideration. law of one price is states in other word as purchasing power parity.

Example, law of one price

Suppose price of one-bushel rice in USA is $1 and current Exchange rate between USD / INR is INR65 per USD. So according to law of one price, price of one bushel of rice in India will be equal to INR65. that is price of 1 bushel of rice in both country is equal.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Explain what is meant by “dehumanization” and explore its role in violent social conflicts OR terrorism.
Explain what is meant by “dehumanization” and explore its role in violent social conflicts OR terrorism.
CANADIAN LAW Chapter 8 – Property Distinguish between real and personal property. Explain what is meant...
CANADIAN LAW Chapter 8 – Property Distinguish between real and personal property. Explain what is meant by a chattel and what is meant by a fixture. Summarize the landlords and tenant’s obligations with respect to commercial leases. Summarize the landlords and tenant’s obligations with respect to residential leases. What is meant by riparian rights? Explain the role of the Canadian environmental protection act.
Critically evaluate Geoff Scott’s argument that shareholders are expecting a dividend and if not paid one...
Critically evaluate Geoff Scott’s argument that shareholders are expecting a dividend and if not paid one the share price will suffer. Does he have a point? Please explain.
Assuming the law of one price, explain what the exchange rate between U.S. dollars and yen...
Assuming the law of one price, explain what the exchange rate between U.S. dollars and yen has to be if the price of steel in Japan is 15,000 yen per ton and the price in the U.S. is $125 per ton - assume no transaction costs.
Purchasing power parity (PPP) a. Is similar to the law of one price b. States that...
Purchasing power parity (PPP) a. Is similar to the law of one price b. States that the prices of baskets of goods (price levels) will tend to be the same across borders in the long run, allowing for exchange rates c. Requires that, under fixed exchange rates, price levels adjust in the different markets to achieve comparability across borders (allowing for exchange rates) d. All of the above
(19.2) What does the increasing impact of the Internet imply for the law of one price?...
(19.2) What does the increasing impact of the Internet imply for the law of one price? (19.3) You have been hired as a statistician by an international economic institution and asked to construct estimates of PPP exchange rates. What data do you need and what prob- lems would you expect?
explain what is meant by market power as defined in the US anti- trust law? At...
explain what is meant by market power as defined in the US anti- trust law? At what level does the US government consider a firm to review for Anti- Trust. Give three reasons why monopolies may exist and explain them briefly.
PPP predictions of exchange rates: Review PPP theory and the Law of One Price as they...
PPP predictions of exchange rates: Review PPP theory and the Law of One Price as they relate to expectations about currency exchange rates. Suppose two countries, Britain and the US produce just one good: beef. Suppose that the price of beef in the US is $2.80 per pound, and in Britain it is £3.70 per pound. (a) According to PPP theory, what should the $/£ spot exchange rate be? (b) Suppose the price of beef is expected to rise to...
*Explain clearly what is meant by the "law of diminishing returns". *Explain clearly how diminishing returns...
*Explain clearly what is meant by the "law of diminishing returns". *Explain clearly how diminishing returns affect the behavior of the average variable cost, as the production volume of good X increases? *Supply (in pure competition) is determined by a point in the ascending segment of marginal cost. True False? Explain carefully.
Explain the role of supply and demand in determining price. Also, explain the concepts of elastic...
Explain the role of supply and demand in determining price. Also, explain the concepts of elastic and inelastic demand. Why should managers understand these concepts?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT