<p><p class="MsoListParagraph" style="margin-left:38.0pt;mso-para-margin-left:0gd"><span lang="EN-US" style="font-family:"Times New Roman","serif"">There is a huge differentiation between spot rate and the PPP exchange rate among these countries. Especially Australia is a remote place that too far from other market. Due to the PPP holds when market is free and frictionless, the weakness of Australia, which is disconnected with current market, rose imported items’ price up and this made huge differences of price between spot and the PPP exchange rate.</span></p><p class="MsoListParagraph" style="margin-left:38.0pt;mso-para-margin-left:0gd"><span lang="EN-US" style="font-family:"Times New Roman","serif""><br></span></p><p class="MsoListParagraph" style="margin-left:38.0pt;mso-para-margin-left:0gd"><span lang="EN-US" style="font-family:"Times New Roman","serif"">Basic assumption of ‘Law of one price’ holds when all markets were free and frictionless and traded internationally, this could be most significant reason. In case of Australia, huge different price of car, there are several reasons. Firstly, opposite with basic assumption of ‘Law of one price’, Australia is disconnected continent, most of imported items implicit high transport cost. For example, the car in Australia is very expensive compare with the US and UK. It is due to high shipping cost, low demand, exchange cost of opposite side of handle, high tax rate and yet they are willing to pay. <o:p></o:p></span></p><p class="MsoListParagraph" style="margin-left:38.0pt;mso-para-margin-left:0gd"><span lang="EN-US" style="font-family:"Times New Roman","serif""><br></span></p><p class="MsoListParagraph" style="margin-left:38.0pt;mso-para-margin-left:0gd"><span lang="EN-US" style="font-family:"Times New Roman","serif"">두개 입니다</span></p><p class="MsoListParagraph" style="margin-left:38.0pt;mso-para-margin-left:0gd"><font face="Times New Roman, serif">감사합니다!</font></p></p>
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