Generally speaking, the theory of absolute purchasing power parity works better for a market basket of goods than for a single good.

Question

Quizplus · Accepted Answer

Absolute purchasing power parity theory suggests that exchange rates should adjust in the long run to reflect the price levels of different countries, ensuring that the same basket of goods would have the same cost in different countries after accounting for exchange rates. This theory has been found to hold better for a diversified basket of goods, rather than for a single good, as the latter may be affected by specific factors that can distort its price in different countries.

Generally Speaking, the Theory of Absolute Purchasing Power Parity Works