One reason the theory of purchasing power parity may not explain price differences between countries is:
A)Real exchange rates are almost impossible to calculate
B)Inflation rates differ across countries
C)Some products do not trade
D)Nominal exchange rates are flexible

Question

Quizplus · Accepted Answer

Purchasing power parity assumes that goods can be traded freely across borders. If some products do not trade, their prices can differ between countries due to local supply and demand conditions, transportation costs, and trade barriers.

One Reason the Theory of Purchasing Power Parity May Not