6. 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 scanner sells for $65.45 in the United States. The exchange rate between the U.S. dollar and the Swiss franc (SFr) is $0.8145 per Swiss franc. Assuming that PPP holds true, how much does the same scanner cost in Switzerland?

A. SFr A 80.36

B. SFr 68.31

C. SFr 100.45

D. SFr 72.32

Suppose the price of the scanner in Switzerland was actually SFr 64.29. Assuming no transaction costs, transportation costs, or import restrictions, PPP predicts that the demand would in Switzerland would increase or decrease?