Purchasing power parity is used for short term analysis because it tends to fail in the long run.

Question

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Purchasing power parity is not used for short term analysis but rather for long term analysis because it assumes that prices of goods and services in different countries should be equal when converted to a common currency. However, in the long run, there are many factors that can affect inflation and cause disparities in prices, leading to the failure of purchasing power parity.

Purchasing Power Parity Is Used for Short Term Analysis Because