Why does purchasing-power parity theory NOT hold at all times?
A) because countries use different currencies
B) because wages are higher in some countries and lower in others
C) because some goods and services cannot be traded
D) because prices are different across countries

Question

Quizplus · Accepted Answer

Purchasing-power parity theory does not always hold because some goods and services cannot be traded internationally, leading to price differences that are not arbitraged away.

Why Does Purchasing-Power Parity Theory NOT Hold at All Times