What Three Real-World Complications Keep Purchasing Power Parity from Being

question 180

Essay

What three real-world complications keep purchasing power parity from being a complete explanation of exchange rate fluctuations in the long run? Explain.

---

Definitions:

Inventory Costs

Expenses associated with managing and holding inventory, including storage, insurance, taxes, and potential obsolescence.

Total Inventory

The total amount of goods and materials held in stock by a business at a given time, including raw materials, work-in-progress, and finished goods.

Cash Discounts

A reduction in invoice price offered by sellers to buyers as an incentive for early payment.

Credit Terms

Conditions under which credit is extended by a lender to a borrower, including payment due dates, interest rates, and repayment schedules.