The Big Mac Index uses the price of a Big Mac in local currencies around the world as a way of testing the purchasing power parity theory.Which of the following partially explains why the PPP theory does NOT apply to the Big Mac Index?
A) because wages do NOT differ across countries
B) because trade barriers, such as tariffs and quotas on beef, may distort local prices
C) because taxes do NOT distort local prices
D) because rent does NOT vary substantially across countries
Correct Answer:
Verified
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