Which One of These Must Be True If Absolute Purchasing

question 38

Multiple Choice

Which one of these must be true if absolute purchasing power parity is to absolutely hold?

• A)Customer preferences for an item must be identical across markets.
• B)There must be greater demand for the item in one area as compared to another area.
• C)Forward rates must equal spot rates.
• D)The goods traded must have a feature unique to each individual market.
• E)Transaction costs must be imposed on both ends of a trade.

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