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Let E the price of a dollar in terms of the yen. In order for the condition E*PUS= PJPto hold, what assumptions does the principle
Let E the price of a dollar in terms of the yen. In order for the condition E*PUS= PJPto hold, what assumptions does the principle of purchasing power parity make?
a.Only that there are no restrictions on trade.
b.Only that the markets are in the state of monopolistic competition.
c.The factors of production are identical between countries.
d.The U.S. and Japan are perfectly competitive and neither transportation costs nor restrictions on trade exist.
e.No assumptions are needed.
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