5. Purchasing power parity The law of one price The theory of purchasing power parity (PPP) states that in the long-run exchange rates between two countries adjusts so that the price of an identical good is the same when expressed in the same currency. A pair of speakers sells for $45.87 in the United States. The exchange rate between the U.S. dollar and the Swiss franc (SFr) is $0.8376 per Swiss Franc Assuming that Ppp holds true how much does the same pair of speakers cost in Switzerland? Ser 46.55 SF 49.28 SF: 62.97 SF 54.76 Suppose the price of the pair of speakers in Switzerland was actually SF 43.81. um no transaction costs, transportation costs of import restrictions DPP predicts that the demand would Switzerland