If the Law of One Price Holds and the Price

question 34

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:

Spending Behaviour

Patterns or habits related to how individuals or groups allocate their money for goods, services, or other expenses.

Growing Company

A business entity that is in the phase of expanding its operations, markets, product lines, or workforce, indicating financial health and potential for future profits.

Social Class Segmentation

A marketing strategy that divides the market into different segments based on social class, targeting consumers based on their social status, lifestyle, and economic factors.

Market Strategists

Professionals who develop plans and tactics to promote and sell products or services, aiming to maximize market share and profit.