Chapter 10.2, Problem 1QS2

Summary Introduction

To Determine:

The principal which is an identical item having identical price in all countries when price is expressed in a common currency.

Introduction:

To receive a certain amount of another currency, an exchange rate determines how much of one currency we need to pay. Whether a specific product will actually cost less or more in a particular country (as measured in own currency) is not determined through an exchange rate.