Question 1
The ________ states that if the costs of transportation are small, the price of the same good in different countries should be roughly the same.
◦ price feedback effect
◦ trade feedback effect
◦ balance of trade effect
◦ law of one price
Question 2
The theory of international exchange that holds that exchange rates are set so that the price of similar goods in different countries is the same is the
◦ purchasing power parity theory.
◦ price feedback theory.
◦ trade feedback theory.
◦ J-curve theory.