Which of the following explains why purchasing power parity may not hold perfectly in the long run?
A) Most countries have free markets with limited government regulation.
B) Consumer preferences for goods and services across countries are very similar.
C) Most countries do not impose trade barriers.
D) Some goods and services produced in any country are not traded internationally.

Question

Quizplus · Accepted Answer

Purchasing power parity assumes that goods and services are perfectly tradable between countries, but in reality, some goods and services are not traded internationally. This can create discrepancies in prices and therefore affect the accuracy of purchasing power parity.

Which of the Following Explains Why Purchasing Power Parity May