Transactions Costs Prevent Purchasing Power Parity from Holding Because

question 2

Multiple Choice

Transactions costs prevent purchasing power parity from holding because:

• A) they make creating exchanges too costly in some places.
• B) they include the expense of transporting the goods to be sold in another country.
• C) the price of a good sold in another country must include the cost of getting it there, which can be high and cause a large price differential.
• D) All of these statements are true.

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