ch11 - Chapter 11 Prices and Exchange Rates 1. Exchange...

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Chapter 11 Prices and Exchange Rates 1. Exchange Rates and Prices in the Long Run: Purchasing Power Parity and Goods Market Equilibrium Goods Market Equilibrium The Law of One Price (LOOP) Purchasing Power Parity (PPP) The Real Exchange Rate Implications of PPP Absolute PPP and the Real Exchange Rate Absolute PPP, Prices, and the Nominal Exchange Rate Relative PPP, Inflation, and Exchange Rate Depreciation Empirical Evidence on PPP How Slow is Convergence to PPP? 2. Exchange Rates and Prices in the Long Run: Deviations from Purchasing Power Parity Limits to Arbitrage 1. Exchange Rates and Prices in the Long Run Understand long-run arbitrage in goods market Understand law of one price (LOOP) and purchasing power parity (PPP) Understand real exchange rates Real exchange rate and its relationship to PPP Real appreciations and real depreciations Overvaluations and undervaluations Understand PPP as it relates to both price levels P and rates of change of prices
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This note was uploaded on 03/02/2012 for the course EC 340 taught by Professor Ballie during the Spring '10 term at Michigan State University.

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ch11 - Chapter 11 Prices and Exchange Rates 1. Exchange...

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