Purchasing power parity does NOT hold in the short to medium run because
A)exports don't equal imports.
B)exchange rates aren't internationally traded.
C)some goods aren't internationally traded.
D)most business cycles are caused by shocks to aggregate demand.

Question

Quizplus · Accepted Answer

Purchasing power parity assumes that goods are freely traded across borders and their prices are equalized. However, some goods don't meet these conditions, such as non-traded goods and services like housing and healthcare, or goods that face trade barriers and transportation costs. Therefore, PPP doesn't hold in the short to medium run. The other answer choices are not relevant to the concept of PPP.

Purchasing Power Parity Does NOT Hold in the Short to Medium