The Purchasing Power Parity Theory Is Not a Good Explanation

Multiple Choice

The purchasing power parity theory is not a good explanation of nominal exchange rate determination in the short-run because:

A) there is no evidence that low inflation is associated with less rapid nominal exchange rate depreciation.
B) most nominal exchange rates are fixed and foreign exchange markets do not bring the supply and demand for currencies into equilibrium.
C) most goods and services are traded internationally and are standardized.
D) many goods and services are not traded internationally and not all internationally-traded goods are standardized.