"A commodity costs the same regardless of what currency is used to purchase it." This is a statement of:

Question

Quizplus · Accepted Answer

The Law of One Price (LOP) states that identical goods or commodities must sell for the same price in different countries when the prices are expressed in the same currency. Therefore, regardless of the currency used to purchase a commodity, it should cost the same if the LOP holds. Choice B is incorrect because Relative Purchasing Power Parity (RPPP) states that changes in exchange rates between two currencies should reflect changes in the level of inflation rates between the two countries. Choice C and D are not recognized principles in the field of international finance.

"A Commodity Costs the Same Regardless of What Currency Is