Trade restrictions can prevent purchasing power parity from holding because:

Question

Quizplus · Accepted Answer

All of these statements are true. Trade restrictions, such as importation paperwork and tariffs, can increase the cost of goods sold, which hinders the ability of purchasing power parity to hold. Additionally, when sellers must pay extra costs imposed by trade restrictions, they may choose to pass those costs on to the buyer in the form of higher prices, further disrupting parity.

Trade Restrictions Can Prevent Purchasing Power Parity from Holding Because