Deviations from Purchasing Power Parity Will Be Increasingly Higher as International

question 54

Multiple Choice

Deviations from purchasing power parity will be increasingly higher as international trade tariffs become more restrictive.The main reason for this phenomenon is that:

• A)arbitrage activities become less profitable.
• B)governments prefer purchasing power parity not to hold.
• C)the interest rate parity fails to hold.
• D)goods become more differentiated across countries.
• E)individuals develop hatred toward closed economies.