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The law of one price (LOP) is the basic fundamental concept of PPP. The law of one price stated that the identical product should sell for the same price which says that in the absence of trade barriers and transactions costs across the countries once converted the prices to a common currency. There are differences between LOP and PPP, LOP applies to individual product whereas PPP applies to the general price level. Today, various economists’ debate over PPP does not hold in the short run, it only holds in the long run. While only few economists believe PPP holds continuously in the real world.
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