Exchange rates will equalise purchasing power parity in the long run unless:
A)all products can be traded internationally.
B)products do not differ across countries.
C)countries practise free trade.
D)countries impose barriers to trade, such as tariffs and quotas.

Question

Quizplus · Accepted Answer

Exchange rates will equalise purchasing power parity in the long run unless countries impose barriers to trade, such as tariffs and quotas, which can prevent the free flow of goods and services and thus distort prices and exchange rates.

Exchange Rates Will Equalise Purchasing Power Parity in the Long