A principal reason that purchasing power parity does not hold exactly in practice is

Question

Quizplus · Accepted Answer

The existence of non-traded goods, goods that cannot be easily traded across borders, results in differences in relative prices between countries and prevents purchasing power parity from holding exactly in practice. This is because the prices of these goods are not subject to international competition and can thus vary significantly between countries. Choices A, C, D, and E are not the main reasons why purchasing power parity does not hold exactly in practice.

A Principal Reason That Purchasing Power Parity Does Not Hold