Which of the Following Is a Reason for the Failure

Multiple Choice

Which of the following is a reason for the failure of the purchasing power parity (PPP) theory to predict exchange rates accurately?

A) It assumes away transportation costs and trade barriers.
B) It does not take into account the law of one price.
C) It does not take into account the practice of arbitrage.
D) It assumes that the markets are not efficient.
E) It does not consider government influence on a nation's money supply.