Purchasing power parity doesn't hold exactly in reality because non-tradable goods:

Question

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Purchasing power parity is the economic theory that exchange rates between countries should equalize the prices of a basket of goods and services in each country. However, non-tradable goods are goods that cannot be traded or transported to other countries, such as haircuts or housing. Therefore, their prices cannot be compared and equalized across countries, which makes it impossible for purchasing power parity to hold exactly in reality. Option A correctly explains this limitation of purchasing power parity. The other options are not relevant to the explanation.

Purchasing Power Parity Doesn't Hold Exactly in Reality Because Non-Tradable