Purchasing power parity assumes

Question

Quizplus · Accepted Answer

Purchasing power parity assumes that there are no transportation costs and no trade barriers, meaning that goods and services can move freely between countries without price distortions. This is what allows for the assumption that the same goods should have the same price in different countries once exchange rates are taken into account. Inflation, asset substitutability, input prices, and real wage rates do not necessarily factor directly into this assumption.

Purchasing Power Parity Assumes