The higher the tariffs between two countries,the less purchasing power parity will hold.

Question

Quizplus · Accepted Answer

Purchasing power parity assumes that goods in different countries have the same prices. However, when tariffs are high, the prices of imported goods will be higher in the importing country, which challenges the idea of purchasing power parity. As a result, the higher the tariffs between two countries, the less likely it is that purchasing power parity will hold.

The Higher the Tariffs Between Two Countries,the Less Purchasing Power