BUS 151 Lecture Notes - Lecture 12: Foreign Corrupt Practices Act, Chilean Peso, Purchasing Power Parity
9 May 2020
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Document Summary
Purchasing power parity (ppp) - an economic theory that estimates the amount of adjustment needed on the exchange rate between countries in order for the exchange to be equivalent to each currency"s purchasing power. S = p1/p2: s represents exchange rate of currency 1 and currency 2, p1 represents the cost of good x in currency 1, p2 represents the cost of good x in currency 2. Look for whether a country is doing gdp/capita to make sure you adjust: chile. Copper: industries taken over without compensation confiscation. Price controls: the bank now bought all liability. Mass inflation and nothing on the shelves for sale (retail plummeted) Bank makes money on the spread (margin) The person who owes the money will now pay the bank. Oecd organization for economic cooperation and development. Present day - /: appreciated against the dollar, due to the global demand for copper (people want chilean copper)
