A major reason that exchange rates do not adjust so purchasing power parity holds precisely is that
A) investors are using forward contracts when trading.
B) financial or capital flows may affect foreign exchange rates.
C) consumers and businesses of each country are not concerned about the cost of goods in other countries.
D) purchasing power parity is only a theory.
E) Exchange rates do, in fact, adjust to ensure that purchasing power parity holds.
Correct Answer:
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