Which of the following are reasons by the absolute PPP would not hold?
I.Consumer preferences
II.Transaction costs
III.Local taxes
IV.Company discounts
A) II only
B) IV only
C) I, II, and IV
D) I, II, and III

Question

Quizplus · Accepted Answer

Consumer preferences can cause differences in prices between countries, transaction costs can affect the feasibility of arbitrage, and local taxes can also cause price differences. Company discounts are not a factor affecting the validity of absolute PPP.

Which of the Following Are Reasons by the Absolute PPP