Mankiw Economics Chap_29 中山大学吴柏林教授“曼昆·经济学原理”绝密资料.pptVIP

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * Purchasing-Power Parity According to the purchasing-power parity theory, a unit of any given currency should be able to buy the same quantity of goods in all countries. Basic Logic of Purchasing-Power Parity The theory of purchasing-power parity is based on a principle called the law of one price. According to the law of one price, a good must sell for the same price in all locations. Basic Logic of Purchasing-Power Parity If the law of one price were not true, unexploited profit opportunities would exist. The process of taking advantage of differences in prices in different markets is called arbitrage. Basic Logic of Purchasing-Power Parity If arbitrage occurs, eventually prices that differed in two markets would necessarily converge. According to the theory of purchasing-power parity, a currency must have the same purchasing power in all countries and exchange rates move to ensure that. Implications of Purchasing-Power Parity If the purchasing power of the dollar is always the same at home and abroad, then the exchange rate cannot change. The nominal exchange rate between the currencies of two countries must reflect the different price levels in those countries. Implications of Purchasing-Power Parity When the central bank prints large quantities of money, the money loses value both in terms of the goods and services it can buy and in terms of the amount of other currencies it can buy. 10,000,000,000 1,000,000,000,000,000 100,000 1 .00001 .0000000001 1921 1922 1923 1924 1925 Exchange rate Money supply Price level Indexes (Jan. 1921 = 100) Money, Prices, and the Nominal Exchange Rate During the German Hyperinflation Harcourt, Inc. items and derived items copyright ? 2001 by Harcourt, Inc. Limitations of Purchasing-Power Parity Many goods are not easily traded or shipped from one country to another. Tradable goods are not always perfect substitutes when they are produced in dif