Which of the following is likely to upset the prediction of the purchasing power parity theorem?

Question

Quizplus · Accepted Answer

All of the factors listed can potentially upset the prediction of the purchasing power parity theorem.

A) If one nation experiences faster technological progress, it may have a greater productivity advantage and higher economic growth, leading to a stronger currency and higher prices for goods and services.

B) The discovery of natural resources can affect the terms of trade and cause inflation or deflation, depending on the size and quality of the resources.

C) Differing government policies, such as tax rates, regulations, and trade barriers, can affect the relative competitiveness and attractiveness of the two nations' economies, leading to currency fluctuations and deviations from parity.

Which of the Following Is Likely to Upset the Prediction