Purchasing power parity does not hold in the short to medium run because
A)exports don't equal imports.
B)exchange rates fluctuate too much.
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 (PPP) assumes that goods are traded internationally without restrictions. However, in reality, some goods are not traded internationally due to transportation costs, tariffs, or other barriers, preventing PPP from holding in the short to medium run.

Purchasing Power Parity Does Not Hold in the Short to Medium