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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
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 printer sells for $75.77 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 printer cost in Switzerland? SFr 111.64 SFr 102.33 SFr 79.08 SFr 93.03 Suppose the price of the printer in Switzerland was actually SFr 74.42. Assuming no transaction costs, transportation costs, or import restrictions, PPP predicts that the demand would in Switzerland
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