If the Law of One Price Holds and the Price

question 26

Multiple Choice

If the law of one price holds and the price of a Big Mac in the U.S.is $1.99 while the price of a Big Mac in Britain is £1.50,then what should the spot exchange rate for $/£ be?

• A) 1.3267
• B) 1.0000
• C) .7538
• D) none of the above

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Definitions:

Fair Labor Standards Act

United States federal law that establishes minimum wage, overtime pay eligibility, recordkeeping, and child labor standards.

Overtime Earnings

The additional compensation paid to employees for hours worked in excess of the standard workweek hours, often calculated at a higher rate.

FICA-OASDI

The portion of the Federal Insurance Contributions Act tax that funds the Social Security program, covering retirement, disability, and survivors' benefits.

Payroll Taxes

Taxes imposed on employers and employees, based on the wages the employer pays to the employees.