Which of the following is false?
A)Exchange rates can and do vary significantly over time.
B)Changes in productivity, economic growth, market structures, and technologies across countries, can cause exchange rates to vary.
C)The purchasing power parity theory is always true in the long run after full adjustment of exchange rates has occurred.
D)Shifts in factor supplies causing commodity price shocks and changes in tastes among countries can also affect exchange rates.

Question

Quizplus · Accepted Answer

The purchasing power parity theory may not be true in the long run even after full adjustment of exchange rates because there may be non-tradable goods and services that cannot be easily traded across borders, which can cause differences in prices and affect exchange rates.

Which of the Following Is False