One reason the theory of purchasing power parity may not explain price differences between countries is:
A) real exchange rates are almost impossible to calculate.
B) inflation rates differ across countries.
C) some products do not trade.
D) nominal exchange rates are flexible.

Question

Quizplus · Accepted Answer

Some products do not trade internationally, which means their prices are not subject to the same forces that would equalize prices across countries as predicted by purchasing power parity.

One Reason the Theory of Purchasing Power Parity May Not