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gtnhenbr [62]
3 years ago
14

Explain the law of one price and the theory of purchasing power parity. Why doesn't purchasing power parity explain all exchange

rate movements in the short run? What factors determine long-run exchange rates?
Business
1 answer:
Masteriza [31]3 years ago
6 0

Answer:

The law of one price establishes that the product or service price will remain the same for all the entire world.

Explanation:

The law of one price establishes that the product or service price will remain the same for all the entire world. It is necessary to take into account for this law that the price of the currency  needs to be also the same and that the price of the product or service would not be affected by other factors such as additional buyers or sellers in the market.

On the other hand the purchasing power parity refers to the idea of an equilibrium of currencies in exchange rates, it means that the power for purchasing will be represented in the same way in the different countries, and it is important to mention that this theory is base in the law of one price.

The  the long run equilibrium is an idea that in theory represents all the equilibrium of prices, quantities, and markets in general; on the other hand, for the short run equilibrium there are some limitations in which the market cannot be explained as properly and fully balanced.

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National income accountants can avoid multiple counting by.
denis-greek [22]

Answer:only counting final goods

Explanation:

3 0
2 years ago
According to Brynjolfsson and McAfee (2014), in winer-take-all markets, the compensation (e.g., revenues) is mainly determined b
podryga [215]

Answer: The correct answer is "relative perfomance".

Explanation: According to Brynjolfsson and McAfee (2014), in winer-take-all markets, the compensation (e.g., revenues) is mainly determined by <u>relative perfomance.</u>

A type of market in which the winner takes everything clearly implies that the best competitors are those who take a large proportion of rewards while the worst little or nothing. To say that it is determined by their relative performance, refers to the subjects receiving rewards based on their performance in relation to the other competitors.

5 0
3 years ago
Economan has been infected by the free enterprise bug. He sets up a firm on extraterrestrial affairs. The rent of the building i
monitta

Answer:

There are two types of profit and costs in nay business, which are accounting costs/profit and the economic costs/profits.

Accounting costs include everything that is tangible or the monetary costs a firm pays, while the economic costs include the cost which is intangible(Opportunity costs) as well as tangible.

Here in this question, the profit of the firm therefore is,

a. From an accountant;s definition = 130000-(6000+42000+7000) = 75000.

b. From an economist's definition = 130000-(6000+42000+7000+65000+6000) = 4000.

Hope this helps you. Thankyou.

7 0
3 years ago
Read 2 more answers
A bank has an allowance for loan loss of $4.5m at the beginning of the year and $4.2m at the end of the year, non performing loa
Marrrta [24]

Answer:

0.259

Explanation:

difference in loan loss allowance in the year= 4.5-4.2= 0.3m

difference in non performing loans in the year= 6.2-5.8= 0.4m

Provision for loan loss= (difference in loan loss allowance + difference in non performing loans)/ net charge offs

provision for loan loss= (0.3+0.4)/2.7=0.259

7 0
3 years ago
On the income statement, a merchandising company reports the cost of merchandise inventory that had been sold to customers. TRUE
Alja [10]

Answer:

True

Explanation:

The correct answer is - True

Reason -

Cost of goods sold is the inventory cost to the seller of the goods sold to customers. It Expense item with a normal debit balance.

The word expense is not written there but it is an expense item on the income statement as a reduction to Revenue.

5 0
3 years ago
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