What is the law of one price, where the price for identical products in different countries should be the same if trade barriers are absent?
A) Purchasing power parity
B) Fixed exchange rate policy
C) Balance of payments
D) Currency swap

Question

Quizplus · Accepted Answer

The law of one price states that identical products in different countries should have the same price if trade barriers are absent. This principle is a fundamental aspect of Purchasing Power Parity (PPP), which focuses on the exchange rate that equates the prices of the same basket of goods and services in different countries. Therefore, option A is the correct answer. Options B, C, and D are unrelated to the law of one price. The law of one price states that the price for identical products in different countries should be the same if trade barriers are absent. This is also known as purchasing power parity. Fixed exchange rate policy, balance of payments, and currency swap are different concepts related to international trade and finance.

What Is the Law of One Price, Where the Price