________ means that the price of similar goods is the same,regardless of which currency one uses to buy the goods.

Question

Quizplus · Accepted Answer

Purchasing power parity (PPP) refers to the idea that in the absence of transportation costs and trade barriers, the price of identical goods should be the same in different countries. This means that the exchange rate between currencies should adjust in a way that equalizes the prices of a basket of goods and services across countries. In other words, if the price of a Big Mac in the United States is $5 and the price of a Big Mac in Japan is 500 yen, then according to PPP, the exchange rate between the dollar and the yen should be such that 500 yen can be exchanged for $5. This theory is based on the law of one price, which says that identical goods should have the same price in different markets.

________ Means That the Price of Similar Goods Is the Same,regardless