In Order for the Condition E$/HK$ = PUS/PHK to Hold

question 73

Multiple Choice

In order for the condition E$/HK$ = PUS/PHK to hold, what assumptions does the principle of purchasing power parity make?

• A) Only that there are no transportation costs and restrictions on trade.
• B) Only that the markets are perfectly competitive, i.e., P = MC.
• C) The factors of production are identical between countries.
• D) No arbitrage exists.
• E) HK and the U.S. are perfectly competitive and there are no transportation costs or restrictions on trade.

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Definitions:

Somatosensation

The body's ability to sense touch, temperature, body position, and pain, often referred to as the sense of touch.

Caudate Putamen

A brain structure that is part of the basal ganglia, involved in various functions including motor control and learning processes.

Damage

Physical harm caused to something in such a way that it is impaired or no longer functional.

Somatosensory Cortex

A part of the brain that processes sensory information from parts of the body involved in tactile sensation.