That identical goods should cost the same in all nations, assuming it is costless to ship goods between nations and there are no barriers to trade, is a reflection of the
A) monetary approach to exchange-rate determination.
B) law of one price.
C) fundamentalist approach to exchange-rate determination.
D) exchange-rate-overshooting principle.

Question

Quizplus · Accepted Answer

The law of one price states that identical goods should cost the same in all nations, assuming it is costless to ship goods between nations and there are no barriers to trade. This principle is a reflection of the basic principles of economics and has been widely accepted as a fundamental principle of international trade theory. The other options, such as the monetary approach to exchange-rate determination, the fundamentalist approach to exchange-rate determination, and the exchange-rate-overshooting principle, are more specific approaches to understanding currency exchange rates and are not directly related to the law of one price.

That Identical Goods Should Cost the Same in All Nations