Purchasing power parity (PPP) may not hold exactly because of which of the following?

Question

Quizplus · Accepted Answer

All of the options listed (shipping costs, insurance costs, and trading costs) are types of transaction costs. These costs can prevent the purchasing power parity (PPP) theory from holding exactly because they add additional expenses to the cost of goods, making it more difficult for prices to equalize across different countries.

Purchasing Power Parity (PPP) May Not Hold Exactly Because of Which