Which of the following statements describes the difference between the law of one price and purchasing power parity (PPP)?

Question

Quizplus · Accepted Answer

The law of one price asserts that in the absence of transportation costs and barriers to trade, the price of an identical product should be the same across different markets when prices are expressed in a common currency. Purchasing power parity (PPP), on the other hand, is a broader concept that compares the relative value of currencies based on the cost of a basket of goods, suggesting that in the long run, exchange rates should adjust to equalize the price of a basket of goods across different countries.

Which of the Following Statements Describes the Difference Between the Law