Which of the Following Provides an Explanation for Why the Theory

question 35

Multiple Choice

Which of the following provides an explanation for why the theory of purchasing power parity is a poor predictor of actual exchange rates?
1) differences in the structure of the different price indices in different countries
2) the presence of nontraded goods
3) changes in the relative prices of traded goods

• A)1 only
• B)2 only
• C)3 only
• D)2 and 3
• E)1,2,and 3

---

Definitions:

Denying

The act of declaring something to be untrue or rejecting the validity of a claim.

Antecedent

An event, condition, or cause that logically or necessarily precedes another.

Standard Form

A commonly accepted or prescribed format for presenting an argument, document, or mathematical expression.

Proposition

An affirmation that offers an opinion or judgment.