Asked by
Yitzchok Weinberg
on Oct 07, 2024
Verified
A box of candy costs 12.80 euros in Germany and $20 in Canada.Assuming that the law of one price holds,what is the current exchange rate?
A) 1 Canadian dollar equals 0.64 euros
B) 1 Canadian dollar equals 0.85 euros
C) 1 Canadian dollar equals 1.21 euros
D) 1 Canadian dollar equals 1.56 euros
Law of One Price
An economic theory stating that in an efficient market, identical goods must have only one price, taking into account factors like transportation costs and trade barriers.
Exchange Rate
The value of one currency for the purpose of conversion to another, indicating how much one currency is worth in terms of the other.
Euros
The official currency of the eurozone, which consists of 19 of the 27 European Union member states.
- Understand the principle of purchasing power parity and its utilization in the realm of international finance.
Verified Answer
KM
Learning Objectives
- Understand the principle of purchasing power parity and its utilization in the realm of international finance.