a. Explain the following three concepts of purchasing power parity: i. The law of one price ii.
Question:
i. The law of one price
ii. Absolute PPP
iii. Relative PPP
b. Evaluate the usefulness of relative PPP in predicting movements in foreign exchange rates on a
i. Short-term basis (e.g., three months).
ii. Long-term basis (e.g.. six years).
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a i The law of one price is that assuming competitive markets and no transportation costs or tariffs the same goods should have the same real prices i...View the full answer
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