A Principal Reason That Purchasing Power Parity Does Not Hold

question 34

Multiple Choice

A principal reason that purchasing power parity does not hold exactly in practice is

• A) that foreign and domestic assets are not perfect substitutes.
• B) the existence of non-traded goods.
• C) that consumers in different countries have different preferences.
• D) costs of production are not the same in all countries.
• E) that it is a short run theory.

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Definitions:

Resistance

In a broad sense, it refers to the opposition to flow or movement, such as electrical resistance in physics or the body's resistance to disease in biology.

Abdominal Aorta

The largest artery in the abdominal cavity that supplies blood to many of the abdominal and pelvic organs as well as the legs.

Unpaired Arteries

Arteries that do not have a matching artery on the opposite side of the body, often supplying blood to midline structures.

Renal Artery

Artery that originates from the aorta and delivers blood to the kidney.