All of the following explain why purchasing power parity does not completely explain long-run fluctuations in exchange rates except
A)not all goods and services produced in any country are traded internationally.
B)consumer preferences for goods and services differ across countries.
C)some countries impose barriers to trade.
D)most countries have free markets with little,if any,government regulation.

Question

Quizplus · Accepted Answer

While all the options provide reasons as to why purchasing power parity cannot completely explain long-run fluctuations in exchange rates, option D is incorrect as most countries do not have completely free markets with no government regulation. Therefore, option D cannot be used to explain the limitation of purchasing power parity.

All of the Following Explain Why Purchasing Power Parity Does