Purchasing power parity will not exist when the cost of moving goods exceeds the price differential between them.

Question

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Purchasing power parity states that exchange rates between two currencies should equalize the prices of a basket of goods and services in both countries. However, if the cost of moving goods between the countries becomes too high, it may be more cost-effective to produce or purchase goods domestically, causing the price differential to persist and preventing purchasing power parity from existing.

Purchasing Power Parity Will Not Exist When the Cost of Moving