Deviations from PPP
A)may be due to the differential speed of adjustment between exchange rates and prices.
B)may occur when international trade involves lags between order and delivery.
C)may appear during periods dominated by news or unexpected events.
D)All of the above.

Question

Quizplus · Accepted Answer

All three statements are true and explain why deviations from PPP can occur. The first statement highlights that exchange rates and prices adjust at different speeds, leading to temporary deviations from PPP. The second statement refers to delays in the delivery of goods and services, which can lead to temporary deviations from PPP. The third statement points out that unexpected events, such as abrupt changes in government policies, can also lead to deviations from PPP. Therefore, all of the above options can account for deviations from PPP.