The theory of purchasing power parity cannot fully explain exchange rate movements because
A. all goods are identical even if produced in different countries.
B. monetary policy differs across countries.
C. some goods are not traded between countries.
D. fiscal policy differs across countries.
Answer:C
The theory of purchasing power parity cannot fully explain exchange rate movements because
A. all goods are identical even if produced in different countries. B. monetary policy differs across countries. C. some goods are not traded between countries. D. fiscal policy differs across countries.