The Idea That with Frictionless Trade All Goods Traded Internationally

question 52

Multiple Choice

The idea that with frictionless trade all goods traded internationally will have the same equilibrium price no matter which currency they are priced in is known as:

• A) covered interest parity.
• B) arbitrage.
• C) the law of one price.
• D) relativity.

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Definitions:

Behavioral Economics

A field of economics that studies how psychological, social, cognitive, and emotional factors influence economic decisions of individuals and institutions.

Stock Portfolio

A collection of stocks that an individual or institution holds, representing investments across one or more types of stock, sectors, or industries.

Positive Utility

The benefit or satisfaction gained from the consumption of goods or services that contribute to an individual's well-being and happiness.

Availability Heuristic

A mental shortcut that relies on immediate examples that come to mind when evaluating a specific topic, concept, method, or decision, which can lead to biases.