What effect do non-tradable goods have on PPP?
What will be an ideal response?
The effect is quite substantial.
In 2006, the output of non-tradable goods accounted for about 46% of U.S. GNP. Along with haircuts, non-tradable goods include routine medical treatment, housing etc. For the most part, non-tradable goods are comprised of services, and the output of the construction industry. Non-tradable help explain much of the wide departure from PPP that is present in empirical data.
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There is a strong consensus among economists in favor of free trade. Governments appreciate the reasons for free trade as well but they may sometimes restrict trade because
a. their absolute advantage is greater than their comparative advantage b. their comparative advantage is greater than their absolute advantage c. the trade generates negative gains d. they may want to protect infant industries e. they prefer dumping to trade
A federally subsidized, state-administered program that pays for the medical and hospital costs of welfare recipients and other low-income people is known as
a. Medicare b. Medicaid c. Social Security d. AFDC e. medical philanthropy