The relative PPP theory gives better results:
A)in the long run than in the short run
B)when structural changes take place
C)the greater is the level of commodity aggregation
D)in tests including developed and developing countries

Question

Quizplus · Accepted Answer

The relative PPP theory is based on the assumption that prices of goods in different countries will equalize over time. However, in the short run, there may be factors such as market imperfections, transportation costs and tariffs that prevent prices from equalizing. In the long run, these factors may dissipate, and the relative PPP theory may provide better results.

The Relative PPP Theory Gives Better Results