If absolute purchasing power parity is said to hold for some good, then it must be true that there are no transactions costs.

Question

Quizplus · Accepted Answer

If absolute purchasing power parity holds, then the price of a good in one country should be equal to the price of the same good in another country when converted using the exchange rate. This implies that there are no transaction costs, such as transportation costs or tariffs, that would prevent the good from being traded between the two countries.

If Absolute Purchasing Power Parity Is Said to Hold for Some