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Purchasing power parity is sometimes referred to as the law of -Select- . It holds that the same products cost roughly the same amount in
Purchasing power parity is sometimes referred to as the law of -Select- . It holds that the same products cost roughly the same amount in different countries after taking into account the -Select- This theory implies that the level of exchange rates adjusts so as to cause identical goods to cost the same amount in different countries. It assumes that market forces will eliminate situations in which the same product sells at a different price overseas. This relationship can be expressed as follows: Ph = (PF) (Spot rate) or Spot rate = Ph/PF Where: Ph = Price of the good in the home country PF = Price of the good in the foreign country Quantitative Problem: In the spot market, 3.60 Brazilian reals can be exchanged for 1 U.S. dollar. An Apple iPad Air costs $520 in the United States. If purchasing power parity (PPP) holds, what should be the price of the same iPad Air in Brazil? Do not round intermediate calculations. Round your answer to the nearest whole number. reals
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