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Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250

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BuyFindarrow_forward

Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250
Textbook Problem

Why might purchasing power parity fail to hold?

Summary Introduction

To identify: The reasons behind the failure of purchasing power parity.

Introduction:

Purchasing Power Parity:

It refers to the relationship which indicates the same cost and same kinds of products in the market of various countries after the adjustment of exchange rates of currencies. This relationship of common price can be termed as law of one price.

Explanation
  • Purchasing power parity assumes that there are no restrictions regarding import and export, but in many cases, import and export policies are not liberal. It restricts the exchange of goods, or any transaction cost, which increas...

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